Lease accounting overhaul - the wider implications

Kashflow logo
1

Changes to lease accounting will be finalised later this year and are expected to have significant implications for businesses that depend on leases.

The exposure draft - originally published on 17 August by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) - will effectively force listed companies to recognise on their balance sheets lease contracts as liabilities or assets.

Since August the new measures have been received mainly with widespread derision, the most recent scorn coming from supermarket giants Sainsbury and Tesco describing the proposals as "unintuitive" and "inconsistent".

Paul Fearn, group finance director for Tesco, said: “We believe that the proposals fail to properly reflect the substance of leasing transactions, introduce accounting inconsistencies and significant financial statement distortions, thereby failing to meet the needs of users.”

In addition, the car trade association Leaseurope issued a letter in response to the proposals, expressing concern over the need to completely overhaul existing lease accounting and the relative costs and benefits.

The level of antipathy the proposals have stirred was aired in Leaseurope’s comment letter on 15 December:

Please Login or Register to read the full article

The full article is available to registered AccountingWEB.co.uk members only. To read the rest of this article you’ll need to login or register. Registration is FREE and allows you to view all content, ask questions, comment and much more.

Robert Lovell
Managing Editor
AccountingWEB.co.uk
Share this content

Replies

Please login or register to join the discussion.

avatar
By HannahP
11th Mar 2011 07:18

leasing industry

These proposed changes should be made not only benefiting the business's owners but rather listen too to the clients' claims. Financial transactions, particularly the leasing industry should think well of leading obligations and assets to stable state and lesser conflicts regarding its accounting.

Thanks (0)