Adrian Bewley's blog: Arrival of IFRS 16 is a good time to review travel policies and mobility options
20 July 2018
The new international accounting standard, IFRS 16, comes into effect from 1 January 2019. Currently its changes only impact international and listed businesses.
These companies are working through how they handle the cost implications of leases, the effect on gearing and options for funding vehicles.
At the same time, large numbers of UK-based and smaller businesses are largely unaware of, or untroubled by, the changes as they're subject to the UK's GAAP accounting standards.
Given the other pressures on company time right now, this is understandable, especially as it's not certain that similar changes will impact GAAP in the future.
Yet it's possible that within the next few years, leases will no longer be 'off balance sheet' under UK accounting rules as well. So now could be a golden opportunity for businesses of all sizes to assess if their broader mobility solutions are flexible and fit for purpose.
As work patterns continue to change, there could be other ways to effect savings.
For example, many businesses have new starters who require a vehicle for three months while they're waiting for their company car, or perhaps require occasional vehicles for employees to use for short journeys. Similarly, businesses that see a high turnover of employees, or have a number of staff on short-term contracts, may have different mobility needs.
There are now several options to support short-term mobility requirements, combining pool car vehicles with 'virtual' rental or car club options, depending on usage. While for longer-term needs, flexible rental for vans and long-term rentals for cars are potential options that are unlikely to fall under IFRS 16.
It could make sense to ensure usage of occasional vehicles - whether rented or borrowed from the car pool - is being tracked. We find many companies don't actually know how much their vehicles are utilised.
It's also a good time to assess the hidden costs of admin. Irrespective of lease or rental costs, how many people are involved in vehicle servicing, maintenance and compliance? Is there adequate parking? Or is parking an additional overhead?
While change can be challenging, it can also bring opportunities for improvement - or at least, for a moment to reflect. Given the changes in mobility today, organisations that question their current choices may well find that easier and better options already exist.
Adrian Bewley is assistant vice president of business rental UK and Ireland for Enterprise Rent-A-Car