The FLA has thrown its support behind
Leaseurope’s proposed alternative right of use model for lease
accounting in its response to the consultation on the IASB’s
exposure draft (ED).
The Leaseurope model aims to offer a
simpler and cheaper approach than that proposed in the ED, while
still meeting the IASB’s objectives.
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Julian Rose, FLA head of asset finance and
data policy, 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.”
It was also suggested that Leaseurope’s
model could help to save UK taxpayers up to £50 million a year,
which would 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.
While half these steps would be quick for an
experienced accountant, automation is unlikely and lessors will
largely be unable to reduce the burden to their customers.
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By GlobalDataThe FLA accepted that leases should go on the
balance sheet, but the question was now about “how they get there”,
Rose said.
He also repeated concerns that the IASB’s
proposals are too complicated and costly, saying: “We think
the IASB really needs to do two things: the first is to simplify
the rules for lessees in order to reduce administrative costs for
them; the second is to delay implementation to allow the very
significant issues to be fully worked through.”
Rose said that to work through the issues in
full could take up to two years.
The FLA put forward its response to the
consultation on 15 December, the final deadline for feedback from
the industry. The IASB aims to finalise the new regulations by June
2011.
