The FLA has put its support
behind Leaseurope’s proposed right of use model for lease
accounting in its response to the IASB’s exposure draft.
The Leaseurope model is
designed to be a simpler and cheaper alternative to the approach
put forward in the draft, while still meeting the IASB’s
objectives.
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FLA head of asset finance and
data policy Julian Rose said: “With the Leaseurope model, the value
of the leases that go on balance sheet is based on what’s been
signed up to, so the minimum lease commitment in the
contract.
“This will reduce the cost to
preparers and make the reported assets and liabilities easier to
interpret and to predict.”
The FLA suggested
Leaseurope’s model could save UK taxpayers £50m a year, which will
otherwise be spent on keeping extra accounting records for tax
purposes.
“There are approximately 75
steps to follow under the IASB proposals. Leaseurope’s approach
would probably take out at least 20 of those. Significantly, the 20
which we think would incur the greatest costs,” said
Rose.
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By GlobalDataWhile half these steps would
be quick for an experienced accountant, automation is unlikely and
lessors will be unable to reduce the burden to their
customers.
The FLA accepted that leases
should go on the balance sheet, but the question was now about “how
they get there”, Rose said.
He repeated concerns that the
IASB’s proposals are too complicated and costly.
