ELFF Study: Changes to Lease Accounting

Proposed changes to lease accounting rules will significantly impact the balance sheets and operations of companies that use lease financing (lessees) and providers of lease financing (lessors), according to a new study from the Equipment Leasing & Finance Foundation.
The study, “Changes to Lease Accounting: Rules, Reactions and Realities,” is designed to help users understand the proposed changes, recognize the market impact of the changes, and identify the challenges and opportunities they represent.
The lease accounting proposal was released by the International Accounting Standards Board and the Financial Accounting Standards Board in August, and a final rule is expected in 2011. Although the proposal is intended to standardize the lease accounting process, it is expected to add significant complexity and processes to both lessor and lessee accounting.
The Foundation’s study examines how the changes are expected to:
• Affect customers’ propensity to lease
• Alter the attractiveness of lease financing
• Modify customers’ approach to lease transactions
• Change how lessors develop and market financial products
• Impact lessor and lessee business processes and related portfolio management systems
• Influence lessor business models and ownership structures
• Affect equipment leasing and finance providers’ decisions to remain in the market or encourage new entrants to replace them
“While the full impact of the lease accounting changes on the equipment leasing and finance industry is still unknown, both lessees and lessors are advised to take action now,” said Edward Dahlka, chairman of the Foundation and President of Assurance Asset Finance. “First, submit a comment letter to the FASB and IASB that provides your company’s views on the changes. Second, use the Foundation’s new study to develop a plan of action so you’ll be ready for the impending changes.”
To read the executive summary of “Changes to Lease Accounting: Rules, Reactions and Realities” the full report can be purchased here http://www.leasefoundation.org/IndRsrcs/MO/FASB.htm.
The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Primarily funded through donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. Visit the Foundation online at http://www.leasefoundation.org/.