There is almost universal opposition in Europe to the proposed changes to the lease accounting rules, according to a Leaseurope study which analysed the opinions of four stakeholder groups affected by the changes.

The study looked at the views of the major auditors, preparers, those firms which will have to comply with the proposed standard, the European Financial Reporting Advisory Group (EFRAG), and the end users of the audited accounts.

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Of the major accountancy firms, Grant Thornton, KPMG, Deloitte, and EY, formerly Ernst & Young, expressed opposition to the proposals published jointly by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) in a second exposure draft (ED) in May 2013.

Included in their reasons were:

– No increase in the relevance of information for users of accounts in comparison to the high implementation costs for companies that prepare the accounts.
– Complexity of the proposals and unjustifiably high implement costs for preparers of accounts
– No conceptual basis for key aspects of the proposals (such as the definition of a lease compared to a service contract and the measurement proposals for lessees.)

KPMG commented in their response to the IASB and FASB: "We continue to support the Boards’ objective to develop a single, less complex, approach to lease accounting," but added "however, the Boards’ work on this project to date has not produced a broadly consistent view among their constituents about what a lease represents, or how it should be reported in the financial statements."

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In its response, Grant Thornton said: "Moving forward with a right of use model is supportable only if a lease can be defined in a manner that satisfactorily distinguishes leases from executory contracts (service contracts)."

And EY said: "It also is unclear to us whether any of the perceived benefits to financial statement users would justify the costs and complexity of applying the ED."

The audit firms suggested instead that the existing accounting model, IAS 17, be kept with improved disclosure provisions.

Several firms which will have to comply with the new standards were critical of the ‘unnecessary complexity and costs of the proposals,’ according to the Leaseurope document.

"The Exposure Draft fails the original goal of the IASB to reduce complexity and to increase comparability in lease accounting," said Volkswagen.