Tiego Lease Engine is your streamlined Lease Accounting Software

Three Key Features of TLE

Tiego released the first version of its lease accounting software in 2013 and has since continuously developed it to comply with K3, IFRS, and RKR R5 standards. When we present the system, we typically highlight three features that define both the system and Tiego:

1. Fast and accurate lease calculations
   TLE delivers high-quality, reliable results for compliant accounting under IFRS 16, K3, and RKR – ensuring correct handling of everything from simple to complex lease contracts.

2. Tailored to your lease contract structures
   The platform is designed to adapt to your specific needs. Whether you manage vehicles, properties, equipment, or special-use assets, TLE supports a wide range of contract types and enables bookings based on your actual terms and business logic – not the other way around.

3. Advanced handling and full auditability
   TLE offers transparency down to every transaction. With detailed audit trails, version control, and support for all required booking types, the system gives auditors the clarity and control they expect – even in the most complex scenarios.

Our foundation in developing the system is rooted in a deep understanding of financial reporting, but the solution has evolved into a highly flexible and powerful lease engine. It supports extended asset information beyond accounting needs, and we recommend scanning and storing all lease agreements directly in the system.

K3

Our K3 clients primarily focus on generating accounting data for group consolidation concerning vehicles and machinery classified as financial leases, when there is a predictable payment stream and the system can calculate the implicit interest rate (based on initial value, any upfront payment, periodic lease payments, and residual value). In addition, operational lease contracts are entered to support disclosure in the annual report and to trigger reminders for renegotiations or terminations.

IFRS

IFRS clients manage vehicles and machinery similarly to K3 users, though the term "financial lease" is not used in the IFRS framework. However, IFRS 16 §26 stipulates that the implicit interest rate must be used if it can be readily determined. The value calculation is nearly identical to K3, but the asset value is often lower under IFRS due to deduction of the expected residual value if the asset will likely be sold. If the implicit rate cannot be calculated (due to missing values), a marginal borrowing rate is used, composed in the system of a base rate plus entity- or asset-specific risk premiums.

For simple contracts, only minimal data is required: name, start and end period, payment frequency, monthly amount, and whether payment is in advance or arrears. TLE can use this to rapidly generate detailed accounting entries for export to consolidation software (or accounting software). For more complex situations, additional data is needed. IFRS also requires recognition of higher asset/liability amounts if the group is “reasonably certain” to extend the lease. The system includes features to support this requirement.

RKR

The Swedish Council for Municipal Accounting (RKR) issued Recommendation R5 on leasing, based on the K3 framework (updated in May 2023, with an accompanying guidance note published in November 2023). Accounting for financial-style leases for vehicles and machinery follows the same logic as in K3. For rental contracts, RKR states they must be treated as financial leases if the present value of future payments equals or exceeds 80% of the asset’s market value. This requires reasonably reliable data on the market value, unguaranteed residual values, and extension periods.

TLE calculates the implicit rate using the same logic as for K3, but based on market value and unguaranteed residual value instead of asset value and purchase option.

Regardless of the 80% threshold, a lease should be treated as financial if it spans the majority of the asset’s useful life, has a custom design, or is of strategic significance. Other factors from the guidance also apply.

Implementation under RKR differs from K3 and IFRS in some key ways:

• Need for information on market values and unguaranteed residual values

• Assessment of customization level and strategic importance

• Need for asset lifetime data

• Additional judgment factors as outlined in the guidance

These are necessary to determine whether a lease is classified as financial.

Tiego believes that municipalities and regions will need to carefully assess and document these judgments in the annual report’s notes. When data is available, the system can assist in preparing reflective documentation. It’s common for implicit rates to vary across and within municipalities and to deviate from marginal borrowing rates.

THREE THINGS THAT DEFINE TLE AND TIEGO

1. Whether the group has straightforward lease contracts (e.g., indexed annually and auto-renewed leases, or company vehicles), or highly complex ones (e.g., lease payment step schedules, foreign currency leases, or provisions for unused space), TLE delivers fast and accurate results for IFRS 16 or K3-compliant accounting.

2. Our system designers have deep experience in group reporting and a strong understanding that detail is key to accurate contract accounting. We invest time with clients to understand these details so the logic of our system’s handling feels intuitive—making it easy to demonstrate to auditors.

3. Tiego consultants are not intimidated by complexity. Back in 2018, we were almost alone in advocating for full retrospective adoption of IFRS 16 (at least when the group’s history wasn’t too extensive). This stance gave us a head start in handling IFRS 16 complexities and allowed us to work closely with clients who had exceptionally high volumes or contract intricacies.