Is everyone ready for the proposed lease accountancy changes when or IF they come about?

Proposed changes to accounting standards represent a radical shake-up of accounting for leases. Under these new measures all lease obligations will be capitalised on the balance sheet. These proposals, if implemented, will have a profound impact on every company that is a user of real estate. The new lease accounting standards are likely to come into effect from 2013, however because of the need to restate prior year figures the true starting period could be from January 2012. This means that companies have another year to put changes in place.

The project's objectives are as follows:

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  To develop a new accounting model for the recognition of assets and liabilities created by leases


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  To ensure that lessors and lessees present relevant, faithfully representative information about the rights and obligations that arise from leases


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  To ensure that users of financial statements are provided with useful, transparent and complete information about leasing transactions in the financial statements


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  To assist users of financial statements in their estimations of the amounts, timing and uncertainty of cash flows arising as a result of leases

However, should these proposals be implemented, users of property will place a far greater onus on the lease versus purchase question. The proposals are in the very early stages although we have been working with several clients to assess their impact. Please feel free to call us for an informal chat on our current views.

Nigel Doherty