A guide to financial leasing for municipalities and its regulations
Similarities and differences in the accounting treatment of leasing in municipalities with K3 and IFRS
In this film, Mattias Elfgren, CEO of Tiego, and Marcus Johansson, accounting expert from Aspia, discuss the differences between the various regulatory frameworks (IFRS 16, K3, and RKR R5).
What are the actual differences when it comes to leasing in municipalities?
Specifically, IFRS 16 requires all leased properties to be included in the balance sheet, while K3 treats leased properties as operating leases, and RKR R5 falls somewhere in between depending on factors such as the length of the lease and whether the property is customized.
Feel free to watch the video with Mattias and Marcus where they go into more detail on what applies when it comes to accounting for leasing in municipalities according to K3 and IFRS.
Financial leasing in municipalities, a short and a long contract.
Financing of leasing in municipalities is the topic of discussion. It has been relevant for several years and the need to implement RKR's regulations has become increasingly relevant.
Historically, financial leasing agreements have often gone unnoticed and many have been classified as operating leases instead of financial leases.
Marcus and Kevin recommend that municipalities and regions analyze the effects of long-term agreements and leasing arrangements on their financial reports. Although Excel can be useful initially, it is often too complex for large volumes and agreements. Tiego's leasing system (TLE) was designed to help manage leasing agreements efficiently.
Feel free to watch the video with Kevin and Markus for managing short and long-term contracts.
Audit reports on financial leasing.
In this article, Mattias Elfgren from Tiego and Marcus Johansson from Aspia discuss audit reports that point out deficiencies in the application of RKR's rules for financial leasing in the municipal sector.
According to the reports, the rules are not being applied correctly, and many contracts are being assessed as financial agreements. Gävle municipality is an example of this, where 32 contracts were assessed as financial, and KPMG called for a reassessment. Umeå and EY have also examined the area and found deficiencies in the application of the regulations. Mattias and Marcus recommend reading the reports and taking note of the white paper on financial leasing from December 2020 to correctly follow the regulations.
Feel free to watch the video where they present two audits from Gävle and Umeå and provide there view on how to follow the regulations and the white paper on financial leasing.
Supporting documentation for the note on financial leasing and for the auditors' review.
In this film, Kevin Hall from Tiego and Marcus Johansson from Aspia present proposals on how leasing can be accounted for more transparently in municipalities' and regions' annual reports, based on the regulations of RKR (Swedish Accounting Standards Board).
Historically, municipalities and regions in Sweden have not followed RKR's regulations for accounting for leasing, which has been brought to attention. Kevin and Marcus propose categorizing leasing contracts and reporting them per category based on RKR's definitions, as well as disclosing information with maturity structure per asset class and considerations when a lease has been accounted for as financial or operational. Through increased transparency, readers of annual reports can more easily understand considerations and gradually achieve better comparability between municipalities and regions.
Feel free to watch the video with Marcus and Kevin for more information.