• Register
Return to: Home > News > Standards > European Commission to challenge Lease Accounting Standard suitability

European Commission to challenge Lease Accounting Standard suitability

The European Commission has begun an assessment of whether the new international lease accounting standard, IFRS 16, will be conducive to the European public good.

The European Commission set out the scope of the review of IFRS 16 in a letter to the European Financial Reporting Advisory Group (EFRAG) which was discussed with Erik Noteboom, the commission's acting director for investment and company reporting, at EFRAG's Board meeting on 16 June.

The review will consider the effects of IFRS 16 on both lessees and lessors in Europe. It will look at whether IFRS 16 is overly complex, how it will impact the way companies use leases, potential effects on competitiveness of European companies and potential effects on financial stability and the cost of capital and credit.

The Commission has placed particular emphasis on small and medium-sized businesses and has asked EFRAG whether IFRS 16 is appropriate for SMEs. Over 99% of European companies - including nearly all SMEs and most users of equipment and vehicle leasing - use national rather than international accounting rules. Most national accounting standards are closely aligned with the international equivalents.

European leasing trade association Leaseurope said it had highlighted to the Commission the problem that once new international rules are in place there is always an argument that national standards should change to achieve consistency. Leaseurope called for early analysis of the effects of IFRS on SMEs, even if most SMEs will be outside of scope until at least 2023.

According to Mark Venus (BNP Paribas), chairman of Leaseurope's Accounting Committee: "It is important that the full effects of IFRS 16 are considered before the new standard is accepted for use in Europe. The immediate impacts may be limited to mostly the largest companies who will usually have the accounting resources and expertise to cope, but it is still vital to establish from the outset whether this new way of accounting for leases is likely to be appropriate for SMEs."

Leon Dhaene, director general of Leaseurope, said: "We are pleased that the Commission by voice of Erik Noteboom, has made clear that it requires independent and objective advice from EFRAG, and advice that is focused on the needs of European businesses. It is important that the costs to SMEs are proportional to the benefits. Whilst the new IFRS 16 standard might be fit for large international groups, Leaseurope fails to see the additional benefit for European SMEs and for their clients and owners."

Top Content

    Accountancy Europe: the winner takes it all

    Jonathan Minter spoke to Olivier Boutellis-Taft, chief executive officer at Accountancy Europe, about how technology could change the industry, and how training needs to keep up to enable the profession to develop

    read more

    Embracing global technology trends

    Accountancy Europe’s Digital Day 2018 found the European accounting profession looking to tackle the challenges presented by new technologies head on. Jonathan Minter reports from the day

    read more

    IMA Conference: automation of the audit

    At the annual conference of the Institute of Management Accountants (IMA) in Indianapolis, Deloitte partner Alex Smith gave a presentation on digital transformation in the profession. Joe Pickard spoke to Smith following the presentation to find out more about his views on the future of audit

    read more

    IMA Conference: technology and the human effect

    The annual conference of the Institute of Management Accountants (IMA) took place in Indianapolis this year. Members of the profession gathered to hear the latest from the institute and other market players, covering some of the challenges and opportunities the profession faces.

    read more

    The Caribbean: a digital paradise

    The ICAC hosted its 36th annual conference in June this year – very much looking to the future following a tough 2017 for the Caribbean. Jonathan Minter spoke with chief executive officer Misha Lobban Clarke

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.