Stories of our impact
Rolling a six with DICE
Our technology gives greater insights into lease liabilities
Understanding the impact of accounting standards and being able to produce long-term financial forecasts is critical to a company’s performance and financial health. But existing processes don’t always provide the functionality required, and often fail to offer the depth of insight needed for them to be useful. So our financial modelling team set about trying to help clients generate more detail and better insights – and ultimately better forecasts. This meant turbocharging the traditional spreadsheet approach, creating something altogether more powerful.
Maintaining a standard
IFRS 16 is the new accounting standard that regulates how companies report information on leases on their balance sheet. Given companies’ huge reliance on leasing property, cars, factories and equipment, the impact of IFRS 16 can’t be overstated. So we spent two months developing an Excel-based financial model that could calculate the lease liability of each asset.
No sooner had we finished building the model than it was put through its paces: a client with over 3,000 high-value leases on its balance sheet asked us to quantify the potential impact of IFRS 16 over an entire decade.
The results for the client were striking – one simple graph showed that a single lease would result in additional balance sheet liability for the group of over $1 billion. Not only did this substantially change the shape of its balance sheet, it also showed how dividend payments might have to be reduced. Our graph showed the benefits of focusing on the long-term impact of the accounting standard, rather than simply on the day it’s implemented.
However, our analysis was still a bit slow for our liking – it took over 15 hours to run it and 3 days to process.
Better, faster, stronger
So we turned to technology to reduce the time from days to hours. We achieved this through developing what we call DICE – Distributed Intelligent Calculation Engine – which is essentially a process that takes a large set of data, splits it into lots of smaller tasks, and executes calculations on multiple virtual computers. The remodelled solution means we can generate almost instant insight, presented through interactive data visualisations.
Many companies are now using our solution to quickly quantify the financial impact of their leasing decisions, helping them to concentrate on future strategy rather than reams of data. None of this would be possible without DICE; it’s unique in the market, and will be the cornerstone of much of our future work around IFRS 16 and beyond.