New accounting standard could hurt lessors

Leaseurope has warned that a proposed new lease
accounting standard could lead to increased complexity in financial
reporting.

The comment was prompted by news that the
International Accounting Standards Board (IASB) and the US
Financial Accounting Standards Board (FASB) have published a joint
discussion paper entitled Leases: Preliminary Views, seeking public
comments on the proposed lease accounting standard.
 
Leaseurope said businesses should be aware that the proposed
changes will have much wider reaching consequences than just an
increase in their assets and liabilities, adding that the
complexity of the standard might overshadow the economic benefits
of the products it provided.
 
The IASB and FASB proposal says that lease accounting should be
based on the principle that all leases give rise to liabilities for
future rental payments and assets (the right to use the leased
asset) that should be recognised in an entity’s statement of
financial position.
 
This approach is aimed at ensuring that leases are accounted for
consistently across sectors and industries.
 
But Leaseurope’s accounting committee chairman Mark Venus said this
looked like another example of standard setters coming up with a
standard that would lead to increased volatility in financial
reporting.
 
“The inevitable diversity of approaches that they will adopt when
making these estimates could very well lead to financial statements
being less understandable and comparable than before,” he
said.