The International Accounting Standards Board (IASB) is proposing
to change dramatically the rules governing lessee accounting – and
it wants comments from fleet providers on its outlined framework
before July 17.
Under the IASB’s outlined new regime for lessees, set out in a
recently published discussion paper, Leases: Preliminary Views, it
is envisaged that end-users of leasing services will have to
account for lease rentals on balance sheets as a liability. This
will involve moving away from the current system whereby finance
leases are shown on balance sheets, but operating leases –
including contract hire – are not, as ownership of the asset is
deemed to stay with the lessor (see Motor Finance March 09).
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In addition, the IASB’s proposals set out an obligation on
lessees to account for options included in a lease – for example,
to calculate the probability that a given asset, such as a car,
will be kept for its initial three-year contract only, or whether
that contract will be extended.
Overly complex?
There are worries within the industry that these proposed
changes could prove a disincentive to lease. European leasing trade
association Leaseurope commented: “The European leasing industry is
concerned that the standard setters are considering an excessively
burdensome approach for accounting for leases.”
Alan Lunt, finance director at Lloyds TSB Autolease, warned:
“Whilst the commercial elements of leasing will not change and
therefore the ultimate cost of leasing the asset will stay the
same, the additional accounting administration by a lessee may well
prove a disincentive and force them to look at other forms of
finance.
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By GlobalData“Certainly the complexity around accounting for options and
estimated term of leases for a multi-vehicle fleet may well prove a
burden fleet managers and business in general find too
time-consuming and costly.”
Senior project manager at the IASB, Rachel Knubley, urged fleet
providers to write to the IASB, and to make their views known. “If
fleet lessors disagree with the proposals, it is important that
they set out alternatives,” she said. “We are looking for comments
on the discussion paper to see if what we are doing is right – if
users say this won’t provide the best process, we will listen.”
The discussion paper currently only deals in depth with lessee
accounting. Changes to accounting for lessors are also on the
horizon, but plans to tackle lessors along with lessees have been
shelved, given the complexity of the subject.
