Europe’s major automotive leasing
association has warned a proposed new lease accounting standard
could lead to increased complexity in financial reporting and

The International Accounting Standards Board and the US
Financial Accounting Standards Board have published a joint
discussion paper seeking public comments on the proposed

Leaseurope, the association representing leasing and automotive
rental in Europe, said businesses should be aware the proposed
changes will have much wider reaching consequences than just an
increase in their assets and liabilities.

The group said the European industry would not like to see a
standard that was so complex it might overshadow the economic
benefits of the products it provided. This was particularly
important in the current economic climate where many businesses
were struggling to find financing, it added.

The proposal states that lease accounting should be based on the
principle that all leases give rise to liabilities for future
rental payments and assets (the right to use the leased asset),
which should be recognised in an entity’s statement of financial

This approach is aimed at ensuring leases are accounted for
consistently across all sectors and industries.

But Leaseurope’s accounting committee chairman Mark Venus said
this could lead to increased volatility and procyclicality in
financial reporting.

“The inevitable diversity of approaches that they will adopt
when making these estimates could very well lead to financial
statements being less understandable and comparable than before,”
he said.

Comments on the proposed standard close on 17 July. The final
standard is due for release by June 2011.

Nicholas Moody