How The Exposure Draft Might Affect Fleets And Leasing Companies

The long-awaited revised Exposure Draft (ED) on lease accounting was published by the International Accounting Standards Board (IASB) on 16 May 2013 and addresses a number of the problems identified by respondents following the initial ED published in 2010.

For lessees, the new proposals bring all leases on balance sheet, with the exception of short-term leases and a few scope exclusions.

The IASB believes this enhances the comparability and transparency of financial statements and resolves certain perceived shortcomings of the current approach that fails to recognise certain rights and obligations that meet the definition of assets and liabilities. It argues that this has resulted in a significant number of leases being recognised 'off balance sheet' and banks and ratings agencies, in particular, making adjustments to company balance sheets for this hidden leveraging.