More than half of businesses worldwide are unaware of a controversial new accounting rule that will put billions of dollars of leased assets on corporate balance sheets.
Fifty four per cent of international businesses questioned by accounting and consultancy firm Grant Thornton had not heard of plans for the new lease accounting standard, which is one of the biggest changes to global accounting for a decade. The rule will affect all but short-term leases, and require organsiations to make extensive changes to financial data and business procedures.
Lease accounting which is being developed by the International Accounting Standards Board and its US counterpart the Financial Accounting Standards Board (FASB), has been widely criticised by businesses for being too complicated and expensive to comply with.
Publication of the final rule has been delayed to give more time to address business concerns. The IASB hopes to publish the final version sometime next year. The rule is likely to come into force after 2014 or 2015, although the IASB board hasn’t made a decision on the date.
The survey of 2,800 international businesses found that, of those who were aware of the accounting changes, 33% thought the change would increase cost and complexity but only 15% thought it would increase transparency.
Twelve per cent indicated that they would alter the way they structure leases in the future.
Only 44.1% of UK businesses surveyed said they knew about the proposed change to lease accounting . Of those that were aware, only 46% were supportive of the changes.
Within the transportation sector, one of the industries which will be most heavily affected by lease accounting, 53% of businesses were not aware of the potential lease changes.
Tarun Mistry, head of leasing and consumer finance at Grant Thornton, said: “Our survey findings should give the [accounting stanard’] boards pause for thought as businesses are seeing costs and complexity in the proposals but are questioning whether there is any improvement in transparency.”
Awareness of the lease accounting rule was greatest in the US (69%), Mexico (68%) and Chile (63%). It was lowest in mainland China (5%), Denmark (8%) and Turkey (14%).