Credit rating firm Fitch Ratings has predicted the proposed lease accounting changes will induce lessees to restructure the leases they sign up to.

The proposed standard, as published in the second exposure draft issued by the two standard-setters, the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB), requires leases of more than 12 months to be accounted on-balance sheet.

Fitch said it believes this will give "a better indication of the economic substance of leases" but may lead companies to restructure leases to circumvent the proposed rules.
The rating agency suggested companies might switch to short-term leases of less than 12 months or replace leases with "service contracts".

The original exposure draft was heavily criticised by the leasing industry in more than 800 comment letters to the two boards and the second draft has also met with criticism.

Fitch has published a report, New Global Proposals to Reshape Lease Accounting, outlining how it will approach the proposed changes in its analysis.

Related stories

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData

IASB, FASB to re-expose leasing proposals

FASB and IASB ‘disagree’ on leasing standards