In a letter to accounting standard setters, the FASB and the IASB, ELFA president and chief executive William Sutton objected to the latest draft of the project over lessee cost allocation issues and the assumption that all equipment leases are essentially purchases.

Sutton said in the letter : “Unfortunately, since we do not believe the Boards have appropriately resolved the question of lessee cost allocation, we are seriously considering withdrawing our support for the issuance of a final standard based upon the tentative conclusions reached in the recent re-deliberations.

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“The tentative decision that all equipment leases are purchases is fraught with difficulties. We believe a continuation of the existing accounting standards is preferable to the model that has been proposed.”

Sutton also included a list of recommended changes to the project which would help to achieve its stated aims, as well as recommending alternative approaches which “differentiate between leases that are purchases of an asset and leases that only represent a temporary transfer of the right of use.”

Sutton concluded the proposed model “does not reflect the economics of a lease contract, it does not provide incremental information beneficial to a cross section of users, and it involves costly and complex accounting analysis and calculations which we do not believe are commensurate with the benefits to users of financial statements.”

The latest objection from ELFA follows a breakthrough in April, when the option of a “whole contract method” was added to the three previously proposed lessee accounting methods; interest-based amortisation approach, the underlying asset approach and the right of use approach.

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