From currency volatility to disclosure demands, multinational groups will face new lease accounting pressures in 2026. Find out what to do about them.
Finance teams at multinational groups across the UK have just come through one of the year’s great pressure points: the January reporting cycle. Teams need to deal with the overlap of statutory accounts, audit preparation, and management reporting, and they’re faced with increased scrutiny from regulators and auditors.
However, things look set to get tougher, as 2026 is poised to bring new pressures, especially on currency volatility and disclosure demands. The good news is that there are solutions that can help finance teams do more than cope in the face of these challenges.
Currency Volatility Impacts Lease Accounting
Currency volatility can complicate lease accounting, especially for organisations still using manual or spreadsheet-based processes. Foreign currency leases introduce both transaction and translation risks that can affect reported results.
- Transaction risk arises when there’s a delay between a lease payment commitment and its settlement. Fluctuations in exchange rates during that period can change the actual cost recorded by finance teams.
- Translation risk occurs when consolidating financial statements from foreign subsidiaries. Changes in exchange rates can distort performance when subsidiary figures are converted into the parent company’s functional currency, potentially creating artificial gains or losses.
Under IAS 21, lease liabilities denominated in foreign currency are retranslated at the closing rate at each reporting period, while right-of-use (ROU) assets are generally treated as non-monetary items and remain measured at historical cost. This difference can create timing and measurement mismatches, requiring careful monitoring to ensure financial statements remain accurate.
FMIS’ lease accounting software helps organisations manage these complexities. It automates the retranslation of lease liabilities, applies consistent calculation rules, adjusts general ledger postings, and maintains ROU assets at historical cost. Built-in reporting features allow finance teams to track currency effects clearly, reduce errors, and simplify compliance with IFRS standards, making currency volatility far easier to manage.
Multi-Entity, Multi-Currency Complexity in Global Groups
Inconsistencies in local practices, data quality issues, and decentralised data are three of the difficulties faced by multinational groups’ finance teams when consolidating leases across the UK, EU, and other international subsidiaries. These issues can be exacerbated when intercompany leases are involved and when finance teams must comply with local currency reporting requirements, making it more difficult to harmonise local lease data to group-level accuracy.
Disconnected lease records and inconsistent incremental borrowing rates can create reporting discrepancies. To ensure accurate measurement, incremental borrowing rates should generally align with the currency and economic characteristics of each lease, reflecting factors such as term, payment schedule, and market conditions rather than being applied rigidly across all leases.
These variations can place finance teams under pressure if they don’t have access to smart systems such as FMIS’ IFRS 16-compliant lease accounting software. The software allows teams to track all agreements, including real estate, equipment, and retail leases, manage large lease volumes easily with fast processing and batch updates, and make changes and adjustments with ease.
Growing Expectations for Audit-Ready Lease Disclosures
Finance teams will need to meet the growing demand for well-structured, transparent disclosure packs. Auditors expect to see all leases, except those that meet specific exemptions, on balance sheets as right-of-use assets. They also want to see corresponding lease liability. This means an increase in reported assets and liabilities and more complex reports as teams must track and measure these assets throughout the lease period. Teams also need to provide maturity analyses of their lease liabilities and disclose their lease expenses and income, as well as cash outflow for leases.
If the documentation on which finance teams base their lease disclosures is fragmented, they risk delaying their reporting. There’s also a chance they could miss vital information, leading to negative audit findings. Prevent this from happening with FMIS’ lease accounting software, which offers flexible financial reporting. This includes lease summaries for all contracts, lease values by period, full lease details, and all reporting necessary to achieve compliance with IFRS 16 and ASC 842 lease accounting standards.
Why Multinational Groups are Reevaluating Tools and Workflows
The pressures described above aren’t the only ones that finance teams will face this year. They also need to address the common pain points that are often exposed during reporting season. Among these are decentralised data, leases embedded in service or supply contracts, data volume and quality, lease modifications, estimate reassessments, variable payments linked to rates or indices, inconsistent group accounting, and the lack of an audit trail. These pain points have led organisations to move away from manual tracking toward controlled systems and processes, enabling greater accuracy, better governance, and faster close cycles.
FMIS’ lease accounting software is among these systems. It offers benefits such as the automation of all necessary lease calculations, comprehensive reporting for all leases, including short-term and low-value contracts for management and compliance purposes, and tracking of all additions, mid-term adjustments, terminations, and other events over the entire lease term.
Rise to Meet Lease Accounting Challenges in 2026
As fraught as the January reporting cycle may have been for the finance teams of some multinational groups, this period can also be seen as a harbinger of change. With the right tools in place, rising to meet 2026’s lease accounting challenges is easier than you might think.
