Dear Sir David,
As chair of the IASB you have done in the past
some good work towards quality financial reporting. Will you lose
your good name now through the absurd right of use approach for
leasing contracts?
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You may remember me in connection to my visit
to you in 1997 as a former chairman of the European Leasing
Association, Brussels.
We had, during the preceeding years, a
discussion over the best financial reporting of lease contracts. In
the following years the IASB completed IAS 17 Leases. Therefore the
decision about the best financial reporting of lease contracts is
already made.
Now the IASB (International Accounting
Standards Board) and FASB (Financial Accounting Standards Board)
have proposed an entirely new rule which is 100 percent opposed to
the established rules IAS 17 and FAS 13, Accounting for Leases.
This, for a man who was one of the creators of
leasing in Europe, is disappointing. I cannot and never will accept
the right of use approach for leases and rentals on the side of the
lessee.
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By GlobalDataWe have a 110 year-old tradition in Germany
that floating effective business cannot be real wealth. Therefore
there is no reason to bring this business onto a balance sheet. If
you do this against this clear and practical law then you will be
misrepresenting: Will you put thousands of managers in this
position?
In Europe there is no basis for the right of
use approach for lease and rental contracts. Please cancel your
incorrect paper.
The right of use approach is an instruction
for manipulation, and not for correctness on the balance sheet. How
can a manager estimate probabilities of extend options? How can a
manager see the changes in the conditions in the future? How should
he in 2010 decide over a contract which is finished in 2020?
These questions are given a fully negative
answer. The decision between operating or finance leases is
unchanged.
Why not a right of use for working contracts?
Why apply your new approach only to leasing? I am missing the
answer from you and your colleges on the IASB and the FASB
boards.
You are most wrong in your new concept for
leasing. By all means ask for additional figures in the notes, but
do not put leases on the balance sheet.
I hope you will not. Therefore please cancel
the exposure draft of lease contracts. I hope my disappointment
over the reporting of lease contracts will soon end.
Professor Dr. h.c. Klaus
Feinen
Co-founder of Leaseurope and Bundesverband
Deutscher Leasingunternehmen, the German leasing
association.
