IFRS 16 in retail – transition enabled by purpose-built lease accounting software
Halfords Group Plc is the UK’s leading provider of motoring and cycling products and services. Through Halfords Autocentres, acquired in 2010, it is also one of the UK’s leading independent operators in vehicle servicing, maintenance and repairs. It has over 450 retail stores and more than 350 garages across the UK, as well as 75 mobile expert vans.
Business Challenge
With the introduction of IFRS 16 lease accounting rules, Halfords – like many retailers – was faced with the sizeable project of bringing the impact of property and equipment leases onto its balance sheets. Given the nature, value and complexity of the leases involved in retail, it’s been the sector most impacted by the standards – and the team at Halfords soon realised there would be a significant amount of work involved when it came to transition.
Solution
At a Halfords-chaired retailer forum in 2017, Halfords was one of nearly 50 financial reporting teams that came together to discuss the topic of IFRS 16 and assess approaches to adoption. The attendees were starting from a blank page, looking in particular at how IFRS 16 transition would be achieved and whether it could be done via spreadsheet. It was quickly obvious that, for portfolios of more than 50 properties, software would be required. With Halfords managing leases for nearly 700 locations, their focus turned to viable solution providers – and following a detailed procurement process they selected MRI ProLease Enterprise as a go-forward IFRS 16 reporting application. The decision to implement the enterprise property management and lease accounting platform was based on its intuitive features and its potential to provide benefit across other business processes in the future.
The volume of data involved meant, without ProLease Enterprise, we would not have been able to execute our year-end financial reporting.
Katie Gregory, Head of Group Financial Reporting
Halfords Group Plc
Business Impact
Halfords’ financial reporting team, responsible for producing management and statutory accounts across the group, is now utilising ProLease Enterprise for IFRS 16 calculations and reporting – with lease obligations included in full-year numbers for the first time in 2020.
Deep functionality
The most important aspect of an IFRS 16 application is that it must be able to accurately and reliably execute relevant accounting processes. ProLease Enterprise offers Halfords a robust platform that provides a far greater level of confidence than error-prone spreadsheets or other manual activities. This is critical in the production of accounts and reports that have a direct impact on the group balance sheet, and also to ensuring accuracy and integrity for audit requirements.
Volume of data
Using software not only enables faster and more reliable calculations, but it also supports the processing of huge amounts of data – and ensures results are being driven from one source of truth. Given the size of the Halfords portfolio, processing the amount of information involved would have been near-impossible without the robust database ProLease Enterprise provides.
Leading IFRS 16 retail solution
ProLease Enterprise has been leveraged by hundreds of retail brands to support IFRS 16 transition. In collaboration with clients such as Halfords and Kingfisher, the software’s functionality has been developed and enhanced to meet the specific needs of the sector. Halfords chairs an IFRS 16 retail forum, and most of the organisations involved use the MRI product.
Business journey
As a leading provider for the IFRS 16 requirements of the retail sector, MRI Software has established strong working relationships with the businesses it serves. Teams have worked in partnership with clients to ensure ProLease Enterprise’s capabilities continue to expand, and has directly supported Halfords’ implementation of the new lease accounting standards. In particular, the client has found MRI’s software Support Agents to be helpful and informative in identifying and working through any issues encountered.
Continual improvement
In ongoing consultation with Halfords, and other clients using ProLease Enterprise as an IFRS 16 calculation tool, MRI has made enhancements to the solution through a series of development releases. Given the newness of the standard and the ways of working, it’s been critical to quickly and efficiently address user feedback to ensure the software meets the relevant requirements and evolves with new learnings.
Read more about our software solutions being utilised to help hundreds of international organisations meet their global lease accounting reporting requirements.