Click here to
Get an instant quote

FASB and IASB submit proposal for new lease accounting approach

Rulemakers in the accounting industry have proposed plans for an overhaul in lease accounting. This would see firms required to account for everything when filling in their balance sheets, except their shortest leases.

The IASB, along with the FASB, the U.S. equivalent, released proposals that could result in a rise in the reported liabilities and assets related to costs of leasing everything from computers and cars to aircraft and manufacturing facilities. So accountants in Liverpool, the Wirral and other areas of the UK, not to mention in the U.S., will need to keep a close eye on the proposed changes.

Current accounting standards say that most leases are failed to be revealed by balance sheets, an approach that has received criticism for not providing a genuine scenario when it comes to leasing transactions.

Under the current standards, leases often go without being reported on the company’s balance sheet. This approach has, in the past, been criticised as it fails to provide an accurate representation of transactions.

IASB’s chariman, Hans Hoogervorst, said:

“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 new proposal, if passed, would see a dual approach applied to the recognition, as well as the measurement and presentation, of both expenses and cash flow which comes as a result of the lease.

Posted by Mark
May 22, 2013
Small Business

No Comments »

No comments yet.

RSS feed for comments on this post. TrackBack URL

Leave a comment