IASB and FASB propose changes to lease accounting

Victoria
By Victoria May 17, 2013 13:33

IASB and FASB propose changes to lease accounting

 

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have published for public comment a revised Exposure Draft outlining proposed changes to the accounting for leases. The proposal aims to improve the quality and comparability of financial reporting by providing greater transparency about leverage, the assets an organization uses in its operations and the risks to which it is exposed from entering into leasing transactions.



Hans Hoogervorst, Chairman of the IASB commented: “The development of an improved standard for leasing is vital. At present, investors must take an educated guess to determine the hidden leverage from leasing by using basic disclosures in financial statements and applying arbitrary multiples. It is clearly not in the best interests of investors to expect analysts and others to guess the liabilities associated with leases. The proposal outlined in this revised Exposure Draft will go a great distance towards improving the quality and comparability of financial reporting in this area.”

Leslie Seidman, Chairman of the FASB commented: “The FASB and the IASB have worked together to develop a revised, converged proposal to address the inadequacies of current lease accounting and disclosures. The proposal is responsive to the widespread view of investors that leases are liabilities that belong on the balance sheet. The Boards revised the original proposal to distinguish between different types of leases for income statement and cash flow purposes, in response to feedback received from stakeholders.”

 

These changes have the potential to significantly change the aircraft leasing industry – for lessor’s the effects will be much less damaging that for airlines. The jury is out on how this will affect how airlines lease aircraft. The next issue of Airline Economics includes an in-depth analysis of the changes. Ensure you receive your own copy, subscribe today by contacting John Pennington at john@aviationnews-online.com.

 

Victoria
By Victoria May 17, 2013 13:33
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