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Walmart optimized lease accounting and adopted IFRS 16 and ASC 842 compliance with Nakisa

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This article was created using public information from the FEI webinar titled “Walmart's Journey to Compliance”, presented by Shawn Husband, the Senior Director, Lease Center of Expertise at Walmart, in collaboration with Nakisa.

About Walmart

Ranked number one on the Global Fortune 500 list since 2014, Walmart operates a chain of hypermarkets, discount department stores, and grocery stores. The corporation holds an international network of over 10,500 stores in 24 countries and e-commerce websites in 10 countries. Walmart employs 2.3 million employees globally, including 1.6 million in the United States alone.

Walmart has been using Nakisa Lease Administration software (NLA) as its global solution to streamline and simplify lease accounting operations while enabling compliance with IFRS 16 and ASC 842.

Walmart’s lease accounting and compliance challenges before Nakisa

In 2016, Walmart initiated its compliance project to adopt the IFRS 16 and ASC 842 lease accounting standards. They faced several challenges as a global enterprise, particularly due to its numerous leased assets within a global network of decentralized legal entities. With thousands of leased assets worldwide, spanning North America, Europe, South Africa, Asia, and Latin America, Walmart’s unique portfolio includes equipment, movable assets, and real estate leases.

Their specific regional requirements, resulting from operating in separate legal entities, introduced complexities related to global divergences in agreement types, sales tax rates, reporting standards, local discount rates (IBR), inflation (such as CPI-tied leases), variable leases, and accounting periods and calendars. This necessitated a scalable reporting system compliant with multiple ledgers under both ASC 842 and IFRS 16 in parallel.

Another challenge Walmart faced on its journey to compliance was the need to centralize and consolidate all new regional contract data each period. As such, the initial recognition of right-of-use (ROU) assets and lease liabilities needed to be accurately and distinctly recorded under both ASC 842 and IFRS 16. This also applied to lease reassessments and modifications, alongside the need for updated accounting schedules detailing the financial calculations of Walmart’s extensive count of leased assets. Moreover, correctly classifying leases as operating or finance and capturing all transactions in management reports was crucial given the number of global Walmart users involved in lease administration.

Additional challenges included producing new compliance-based disclosure reports, especially given the divergences between ASC 842 and IFRS 16. Lastly, their accounting information needed to be complete and include an audit trail for overall control purposes.

The solution: Nakisa’s lease accounting software, with enterprise-grade capabilities and native bidirectional SAP integration

To comply with the latest lease accounting standards, Walmart recognized the need for a scalable solution sophisticated enough to manage an incredibly large number of leases (including equipment, movable assets, and real estate) across multiple markets. They also required software with robust accounting capabilities, able to run over 200 complex test cases while deriving complete and accurate calculations and disclosure reports under both ASC 842 and IFRS 16. Finally, Walmart needed lease accounting software capable of syncing data from multiple ERP systems and databases, including master data, vendors, currencies, exchange rates, cost objects, and asset classes. Nakisa Lease Administration connects directly to the general ledger and thus does the FX correctly, which is required for multi-currency remeasurement and translation. Not only did Walmart believe that Nakisa Lease Administration software was the best solution to meet these needs, but the company also identified Nakisa as the only lease accounting and management solution capable of meeting certain key requirements.

Nakisa also best serves as a one-stop shop for complete lessee reporting, as the solution can provide reports for both expired and active leases. This was a feature Walmart noted could be a struggle for other solutions, yet they viewed it as critical for any company, as users would need expired lease information for cash flow and income statement disclosures. By showing both dynamic and historical lease results from modifications, the Nakisa system alleviates additional work for Walmart users and ensures accurate financial statement reporting.

Last but not least, Walmart valued Nakisa's knowledgeable team of technical experts. When choosing a lease accounting solution, it’s imperative to select one with a knowledgeable team, as no system accomplishes everything you desire. Implementing and improving these systems is complex and challenging, underscoring the importance of relying on the vendor’s partnership to refine and enhance the tool.

The Result: Walmart’s successful journey to IFRS 16 and ASC 842 compliance

A sophisticated scalable solution, Nakisa Lease Administration is able to manage thousands of leases in a single system and automatically post hundreds of thousands of journal entries per month to their ERP system. By centralizing Walmart’s lease data from disparate systems and geographic locations, Nakisa Lease Administration provides global visibility. It also facilitates lease reassessments and modifications consistent with each adopted accounting policy and delivers complete and accurate calculations and disclosure reporting.

“Nakisa for us is the one we are using for real estate for all of our markets. The benefit that we have seen is that it can do the accounting IFRS 16, ASC 842, and have an SAP integration. It is the system that we used that connects to the fixed assets and solved the effects problem.”

– Shawn Husband, Senior Director, Lease Center of Expertise, Walmart

One key benefit to Walmart’s successful journey to compliance is Nakisa’s capability to accurately convert a lease from transaction currency to functional currency for reconciliation in a group or reporting currency. Nakisa Lease Administration provided value beyond compliance by supporting Walmart with additional operational and analytical reports. One such report was an Activity Analysis report, co-innovated by Nakisa and Walmart for forecasting and analysis purposes. Finally, Nakisa Lease Administration encapsulated the proper level of accounting processes, workflow approval process, segregation of duties, IT General Control (ITGC), and user training, providing a definite advantage given that ASC 842 and IFRS 16 represent perhaps the most complex changes in the accounting practice ever.

Nakisa and Walmart's partnership has demonstrated the importance of having a reliable partner to navigate the complexities of system implementation. Nakisa's ability to integrate and improve the tool has been crucial, as it involved intricate infrastructure and configuration challenges, along with hand-in-hand collaboration with Walmart’s IT. “I think it's safe to say we got Nakisa into more markets faster than we had any other software program we've ever installed across Walmart”, mentioned Shawn Husband.

Shawn Husband also led Nakisa Lease Administration’s User Group, an organization comprising over +300 members from various companies who collaborate to address their lease accounting challenges. This position provided him and Walmart with valuable insights.

Looking for a lease accounting solution tailor-made for global enterprises?

Nakisa’s lease accounting software is designed to meet the complex needs of global enterprises. This comprehensive solution supports parallel compliance with IFRS 16, ASC 842, and local GAAP standards, ensuring that your organization remains in line with the latest accounting regulations. It offers robust functionality for managing lease data across various jurisdictions, simplifying the consolidation and reporting processes. With Nakisa's user-friendly interface, advanced analytics, and native bidirectional integrations with SAP ECC, SAP S4/HANA, and Oracle, large organizations can streamline and simplify their lease accounting operations, enhance transparency, and make more informed financial decisions. Whether you are handling real estate, equipment, land, or fleet leases, Nakisa provides the flexibility and scalability required to support your global lease portfolio. Discover more about Nakisa Lease Administration software here, or request a demo tailored to your specific business requirements.

walmaart
Retail
Bentonville, Arkansas
$611 billion USD
SAP (ECC and S/4 HANA)
65,000+ globally
-

Centralized lease data, Global visibility, Scalable multi-currency dual-GAAP (ASC 842 & IFRS 16) solution, Seamless integration with complex ERP landscape, Complete, accurate, and dynamic disclosure and reconciliation reports, Co-innovation and partnership with leasing experts to develop program

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