by Sebastian Clark
The US Equipment Leasing & Finance Association (ELFA) has called for the international standard setters to reconsider the proposed lease accounting changes and has urged all stakeholders to submit comments on the exposure draft before the 13 September deadline.
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William Sutton, ELFA president and chief executive, has said the second exposure draft published by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) in May has "serious shortcomings" and has urged the boards to re-evaluate their proposal.
Sutton highlighted an independent report by the American Accounting Association (AAA) which said increased disclosure in financial statements was what was need and not a "drastic overhaul" of the lease accounting standard.
Sutton said the study, Evidence That Market Participants Assess Recognized and Disclosed Items Similarly When Reliability Is Not an Issue, presented "empirical evidence" the notion that "operating lease obligations are hidden and obfuscate true financial performance is ungrounded" and the current practice for lessee operating lease footnote disclosures under Generally Accepted Accounting Principles (GAAP) are processed effectively.
Sutton also pointed out the FASB’s own Investor Advisory Committee concluded that the exposure draft is not an improvement over current GAAP and is too complex and recommended "improved disclosures" rather than completely reworking the current lease accounting standard.
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By GlobalDataThe EFLA president said: "It is essential that the boards carefully consider comprehensive public input and comment before finalising their proposal to ensure a workable lease accounting standard.
"We urge all lessees and their financing partners and other stakeholders to submit comment letters on the exposure draft by the September 13 deadline."
Sutton’s views echo those of European leasing trade body Leaseurope.
Writing in Leasing Life, Jacqueline Mills, director of asset finance and research at Leaseurope, described the right of use model laid out in the exposure draft as "simply unworkable" and called on the boards to retain the current accounting practice with added disclosures.
