UK Lease Association Concerned At IASB Proposals

by Robin Pilgrim, LawAndTax-News.com, London

23 August 2010

Proposals published by the International Accounting Standards Board (IASB), could mean that asset finance, the largest source of debt finance for UK businesses, will be more difficult to obtain, according to the UK Finance and Leasing Association.

The F&LA has warned that the proposals as they stand would hamper the country’s economic recovery, which depends on strong business investment.

Under the current rules for reporting operating leases, businesses’ accounts show the actual rent paid for equipment. But under the new proposals, they would instead have to prepare theoretical estimates of the value and cost of the lease and include these on their balance sheets.

The leasing industry has highlighted the extra administrative burdens this would create for UK businesses, and the accounting uncertainty to which it would lead. The proposed new rules could also reduce the availability finance for business because the changes are not being coordinated with existing capital requirements regulations, the F&LA warns. The Association is also concerned that the IASB has not carried out a cost-benefit assessment of its proposals, which is a requirement for new UK regulation.

Julian Rose, Head of Asset Finance at the Finance and Leasing Association said:

“The IASB’s proposals involve taking real numbers and replacing them with a mish-mash of accountants’ assumptions, estimates and adjustments. To propose imposing these arcane and costly new regulations on UK businesses so soon after the recession makes no sense. The new rules could reduce the supply of funds available for new lending and contradict the government’s drive to cut unnecessary regulation. Today’s proposals appear to ignore the IASB’s own discussions on lessor accounting merely to permit convergence with the American accounting regulators.

“UK businesses, their investors and the government should join us in calling for the IASB to carry out a proper cost-benefit assessment and to drastically simplify its proposals.”

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