Grant Thornton International (GTI) has expressed reservations against the converged lease accounting proposals issued by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB).
In response to the consultation launched by the standards setters, GTI said the latest proposals would not improve financial reporting and would be too costly to implement them.
At the same time GTI acknowledged that the IASB and FASB should continue working together to improve lease accounting.
GTI said both standard setters should develop an alternative model that provides users with more relevant information and a more consistent accounting treatment for leasing transactions.
"In our comment to the two boards we propose that an alternative, control-based model may well offer an appropriate long-term solution for lease accounting," GTI stated.
In its statement the firm stressed the importance of the lease project as a GTI’s global survey, which questioned 3,000 businesses in 42 countries, found that 78% of businesses hold leases, with around 20 contracts on average.
At a conference in Berlin this week, IASB chairman Hans Hoogervorst supported the convergence project on lease accounting and stressed that a majority of contracts are not recorded on the balance sheet, despite the fact they contain a heavy element of financing.
"For many companies, such as airlines and railways companies, the off balance sheet financing numbers can be quite substantial. It has been estimated that the hidden leverage in leases leads to an underestimation of long-term debt by some 20%. So we are not talking of small fry," Hoogervorst added.
The deadline to comment on IASB and FASB proposals expires today 13 September.
Grant Thornton International
The International Accounting Standards Board
The Financial Accounting Standards Board