accounting standard could lead to increased complexity in financial
reporting – and a disincentive to leasing.
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 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 new proposal says 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.
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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 lead to financial
statements being less understandable than before,” Venus said.
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