ALD Automotive believes that the proposed changes in accounting place an unreasonable administrative burden on companies who use full service vehicle leasing as a simple, low cost, outsourced solution. Mike Masterson, CFO, develops ALD's point of view.
How do you view the proposed approach to lease accounting as described in the IASB/FASB discussion paper?
Mike Masterson: ALD strongly support the goals of the IASB/FASB in developing a standard which provides transparent information for the users of accounts. We agree that the current standard involves a high level of subjectivity and that material assets can currently be shown only in the notes to the accounts. Our concerns focus on the complexity of the proposed new standard which could discourage customer who currently choose full service leasing as a simple financing solution. We do not feel that the right of use approach can be applied in the same way to both big ticket leases and full service leasing which is effectively an outsourced service product.
What are some of your reservations concerning this paper?
Mike Masterson: We have a major concern that the discussion paper has focused almost entirely on Lessee Accounting. The fact that sub leases put many businesses in the position of being both lessee and lessor makes the standard very confusing. Fleet operating leasing are designed to be regularly adjusted in order to reflect variations in mileage and lease term. The proposed accounting for these leases would not only be complex but would lead to considerable balance sheet volatility. This is contrary to the intentions of the new standard. The discussion paper applies the same treatment to all assets. We do not think that the administrative burden of this approach is economically justifiable for business who lease immaterial and non-core assets. In this respect, we think that a full cost benefit analysis should be undertaken before the standard is progressed any further.
What next ?
Mike Masterson: We are currently working with both the IASB and LeaseEurope to try to simplify the proposals for ourselves and our customers. We are keen to see the reaction of the IASB/FASB to our response to the discussion paper and we are seeking a more detailed consideration of the lessors perspective.
| 07/10/2009 |
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