There is a large discrepancy between the number of businesses holding leases and those who are aware of proposed global changes to lease accounting, according to a survey by accounting firm Grant Thornton International (GTI).
The review of 3,450 businesses in 44 economies found that 78% of companies hold leases, only 42% are aware of revised proposals to be published by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB), meaning more than 45% of lessee firms are unaware of the impending changes.
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This is despite the fact that such changes will mean companies operating under international IFRS and US GAAP financial reporting standards may be required to record additional "trillions of dollars" in assets and liabilities.
The firm’s International Business Report (IBR) states that on average a business will hold 20 leases; Swedish businesses hold the most with an average of 68, followed by Japan, Finland and Australia at 49, 39, and 25 leases per business respectively.
The report also found that awareness of the change was highest in the US at 75%, India at 70% Chile at 60% and the UK at 56%, while it was lowest in Lithuania at 8%, and France, Brazil and China at 13% each.
Commenting on the proposals, which are backed by 47% of businesses and opposed by 33%, according to the IBR, GTI chief executive Ed Nusbaum said the firm welcomed efforts "to improve the definition of a lease in order to distinguish leases from service contracts and address concerns about front-loaded expense recognition".
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By GlobalDataHe added: "The key question now is whether these changes address constituents’ concerns sufficiently to enable the project to move forward – if not then a reboot will be needed."
He said that greater transparency was needed around operating leases, as current financial statement information "does not provide complete, readily understandable information about the obligations associated with operating leases".
