One in two lessees could move away from
leasing in the future as a result of the proposed changes on lease
accounting.
A survey by PricewaterhouseCoopers (PwC) has
revealed that between 40% and 60% of the lessees surveyed don’t
expect to continue leasing the same way as today once the new lease
accounting standards are in place.
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They might consider shorter-term leases,
moving to more service type contracts and outright purchase of
assets as alternative to traditional leasing, the survey found.
The PwC survey confirmed that firms don’t
fully understand the implications of the new standards on their
business. Although most firms (85%) are aware of the upcoming
changes, 43% of the respondents are not well-informed at this
stage.
Half of the surveyed firms said that they plan
to ask their leasing providers for the data required for the
implementation and ongoing accounting for leases. Only 13% of
respondents have initiated discussions with their lessors.
According to PwC, this may indicate that some firms are unaware
that their current rental/service agreements will be recorded on
balance sheet in the future.
The new rules will require changes to
Enterprise Resource Planning (ERP) systems, processes and controls.
However, only one firm in four said it has the resources available
to implement the new lease standards.
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By GlobalDataThe majority of respondents said they do not
currently have the necessary information and data (68%), resources
(74%), processes (78%) and IT systems (76%) in place to implement
the new lease standard.
Up to a third of surveyed companies expect a
decline in credit rating as a result of the new lease standard, and
16% expects a breach in their covenants.
The PwC survey was carried out between May and
August 2010 and involved 125 respondents from 21 European
countries.
