The on-going saga of modified lease accounting rules has taken another step. Accounting standards boards IASB and FASB are closer to finalising these, with a draft being scheduled for August. The biggest changes are set to be for lessees (and therefore car fleets) who are likely to have to recognise almost all lease commitments on their balance sheets, not just finance leases as at present. On the lessor side (car leasing companies), leased assets will probably have to be split into financial assets where receivables are concerned, and property, plant or equipment assets for the residual value. It is also likely that many equipment lessors will be able to make some use of the ‘partial de-recognition (PDR) system preferred by the leasing industry. There has been a change of position concerning the ‘performance obligation’ (PO) method, but it now appears that both of these methods will be used, depending on circumstances. Captive lessors are estimated to be the most likely to gain from the PDR system. The position of service-included leases is also under consideration, and these are set to continue to make a division between the product itself and the service.

Share