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August 2, 2009

Standard raises complexity fears

Representatives from the leasing industry
have voiced concern that a new lease accounting standard being
drafted by the International Accounting Standards Board (IASB)
could add cost and complexity to their operations.

The comments coincide with the deadline for
comments on the IASB’s lease accounting discussion paper.

The board embarked on the project to update
lease accounting to address a perception that the current standard
does not meet the needs of users, is complex and is conceptually
flawed.

At a lease accounting round table hosted by
The Accountant, International Accounting
Bulletin
, Motor Finance and Leasing Life
this month, Angel Trains finance director George Lynn said the new
standard the IASB has proposed will “undoubtedly” cause some people
to choose not to enter into operating leases.

“I think it will be the complexity of analysis
and valuations, together with the additional costs to carry out the
associated new work that will put lessees off,” he said.

Also speaking at the roundtable, UK Accounting
Standards Board chairman Ian Mackintosh said the board broadly
supports the proposals, but he acknowledged the leasing industry’s
concerns.

“One thing that comes across to me today is
the emphasis on worry of complexity of cost. Wherever there is a
way to avoid complexity and cost it should go that way,” he
said.

“If you have a thousand cars [leased] each one
will be a bit different, but you could look at them as a group and
that could have quite an important implication. The other thing is
the materiality, if that could be sussed out a bit more and made
clearer it could get rid of a lot of small problems.”

Complexity concerns have been particularly
prevalent from industry groups representing SMEs. The UK-based
Finance & Leasing Association and the European Federation of
Accountants and Auditors for SMEs both warned about rules that
would be overkill for small business.

A supplement featuring a full write-up on the
lease accounting roundtable will accompany next month’s issue of
International Accounting Bulletin.

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