Our Top 5 Blogs of 2023
As we reflect on the dynamic landscape of finance and asset management, we'd like to share with you our "Top 5 Blogs of the 2023" — a compilation of articles that delve into the intricacies of IFRS 16 calculations, the significance of WACC, and the nuanced decisions surrounding leasing versus buying.
How to Complete IFRS 16 Calculations Correctly
Ensuring you get your IFRS 16 calculations correct is essential, not only for compliance and financial reporting reasons but also to maximise the return on investment (ROI) for every lease a company holds. This article outlines how to correctly calculate two of the most important IFRS 16 figures — the right-of-use asset (ROU asset) and the right of use liability (ROU liability). Keep reading to understand how to calculate these figures, including the required data inputs.
What Is WACC and Why Is It Important?
Within the world of leasing the acronym WACC comes up a lot but is rarely understood by anyone outside of the finance department or the C-suite. However, it’s a vitally important financial concept for reviewing the financing of assets.
The weighted average cost of capital (WACC) is commonly used in financial decision-making and must be applied to all potential investments in order to accurately calculate the overall cost of each project or investment.
IFRS 16: Why you shouldn’t always use low-value & short-term exemptions
Many factors are involved in getting IFRS 16 right, both for compliance and to realise operational and strategic benefits. And while many organisations made decisions based on making the transition and compliance process easier when the standard came into effect in 2019, it doesn’t mean there aren’t factors that companies should assess to ensure IFRS 16 is compliant and meets some of its corporate objectives. The low-value and short-term exemptions, which provide two scenarios where leases don’t need to go on a company balance sheet, is a critical area that companies should analyse to ensure they are getting it right.
Why Companies Prefer Leasing Over Buying
It can be a tough decision to make, especially when considering that different industries benefit more than others from leasing or buying outright depending on the specific needs of that sector. Therefore, you need to consider the pros and cons in relation to your own unique business. It’s possible to lease almost anything you could buy, such as cars, property, IT and telecommunication equipment, printers, photocopiers, machinery, and even furniture. So, deciding the best option for each of these needs some research and careful consideration.
How Do Leasing Companies Make Money?
Leasing companies differentiative themselves by structuring revenue models that ensure the finance agreements (leases) are mutually beneficial — a stark difference to the traditional CAPEX ownership model where the financing of the asset and its use typically aren’t linked to optimise outcomes for both parties. To demystify the leasing process, this article explains how leasing companies make their money and demonstrates how the right leasing and asset finance provider helps companies optimise their asset management.
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