FLA responds to proposed international rules on lease accounting
The Finance and Leasing Association (FLA) has responded to the joint announcement from the International Accounting Standards Board (IASB) and the (US) Financial Accounting Standards Board (FASB) of preliminary agreement on how leases should in future be recorded on companies’ balance sheets. Almost every user of international accounting standards is a lessee or a lessor and the new rules could potentially add £220 billion to the balance sheets of FTSE companies.
The issue has been under discussion since 2006, so any progress towards removing the long-standing uncertainty is welcome. But the IASB/FASB announcement covers only one aspect of the proposed new international lease accounting regulations. A further draft of the full set of proposed new rules is expected towards the end of the year, and is likely to be very different from earlier proposals. The FLA pointed out that the previous draft rules would have required businesses using leases to carry out at least 75 separate steps to account for each of them. It is to be hoped that the new rules will be more proportionate.
George Ashworth, Vice-Chair of the FLA’s Asset Finance Division, said:
“As the recognised industry association, the FLA remains committed to securing a commercially sensible approach to lease accounting, for both lessees and lessors. It is encouraging that, over the last year, the international standards boards have agreed to remove many of the unnecessary “bells and whistles” in their earlier proposals. But we need to see that reflected in the new draft proposals when they emerge later this year. The key point is that accounting must reflect the economic substance of leases. Otherwise, this vital form of finance for UK businesses could become more difficult to use and company accounts less useful.”
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Note to editors:
1. In 2011, FLA members provided £72.9 billion of new finance to UK businesses and households. £20.8 billion of finance was provided to businesses and the public sector, representing around a quarter of all fixed capital investment (excluding real property and own-account software) in the UK last year.
For further media information, please contact:
Helen Saxon, FLA
T: 020 7420 9664 E: email@example.com
M: 07918 766 993