New accounting standard under the spotlight at leasing conference

Over 100 members of the asset finance industry and businesses from across Europe met in London last Friday, 22 May, to debate the preliminary views on lease accounting that were published recently by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB). They were joined by representatives of the IASB and European standard setters, together with leaders of the U.S. Equipment Leasing and Finance Association and the Australian Equipment Lessors Association.The European Forum, “Putting Leasing on the Line”, hosted jointly by industry trade bodies, the Finance & Leasing Association (UK) and Leaseurope, considered the standard setters’ long-awaited discussion paper that focuses on putting all types of leases on firms’ balance sheets. This would involve the several million businesses across Europe who lease or rent making significant changes to the way they account for leases of all types of assets, including car leasing, commercial vehicle leasing plus the leasing of machinery, PCs and photocopiers.The European leasing industry is concerned that the standard setters are considering an excessively burdensome approach for accounting for leases. Leasing provides vital economic benefits for many businesses, and the Forum heard that there is a risk that these benefits could be undermined by unnecessarily complexity.Stephen Sklaroff, Director General of the UK’s Finance and Leasing Association, said:“We believe that the proposed changes could have wide-reaching consequences for companies. Our concern is less about the absolute level of changes to balance sheets and income statements, because we know that UK companies use leasing for sound business reasons. We are more concerned about the complexity of the new regulations that preparers of accounts could have to cope with. The IASB needs to avoid gold-plating new regulations, and should ‘think small first’ by carefully examining the impact on small and medium-sized businesses before making any decisions."Chairman of the forum, Mark Venus, said: “The focus for lease accounting should be on improvement and simplification. A balance between the needs of users of accounts and the costs for preparers must be achieved. However, the complex new methods proposed may make this vital form of business finance more difficult to use and more opaque for users of accounts. It is essential now that the wider business community makes its views clear to the IASB and FASB, so that the standard setters understand the damage that they could cause to European businesses already struggling to find finance in today’s difficult economic environment.”

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