Proposed accountancy changes may affect UK firms

Date: 19th August 2010

A newly proposed change to accountancy practices could have serious consequences for UK businesses.

The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board have published a joint proposal to alter the way leases are dealt with on firms’ balance sheets.

It would mean that companies would have to list leased assets, such as vehicles, property and equipment, as liable assets on their accounts.

They would have to include the liability for payments arising under the lease contract as well as the right to use the underlying asset on statements of financial position.

Sir David Tweedie, chairman of the IASB, said: “The leasing industry plays an important role in many economies by helping companies manage cash flow and working capital.

“However, much of the estimated annual $640 billion (£412 billion) of lease commitments fails to appear on the balance sheet of lessees, thereby giving a false impression of companies’ liabilities and gearing.”

Posted by Emma Clarke