Leaseurope has published an update paper criticising the International Accounting Standards Board’s (IASB) project to develop a new accounting standard for leasing.
The Leaseurope update assessed the project against the IASB’s objectives, from when the project started in July 2006, and concluded that none of the five main objectives of the project are likely to be achieved by the current proposals.
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The Leaseurope update showed that the current proposals would put business investment at risk and so damage the growth prospects of European businesses, in direct conflict with the European Union’s agenda for growth.
Leaseurope’s main contentions about the leasing standard adjustments by the IASB include;
- The difficulty in measuring the substantial extra systems and accounting preparation costs for European businesses.
- Simplifications and exemptions proposed or under discussion are likely to affect small quantities of equipment leases and offer limited relief.
- The IASB has excluded from its analysis the effects of the proposals on SMEs
- The IASB has given very limited attention to the effects of the proposals on other regulation, e.g. tax rules and banks’ capital requirements, some of which could be substantial and present further risks to business investment in Europe.
- Having fundamentally different accounting models for lessee and lessor accounting cannot be an enduring solution and will inevitably lead to a further review of lease accounting, causing confusion and increasing costs and uncertainty.
- The IASB has not compared the proposals with the ‘next best alternative’ which means that there is no way of knowing whether the proposals provide the optimum balance of costs and benefits.
Mark Venus, chairman of the Leaseurope’s Accounting Committee said: "Particularly at a time when the European Central Bank is investing heavily in facilitating credit provision to improve the business environment for European firms, the IASB should not issue a new Leases standard until it is clear that the project objectives will be achieved."
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