New lease accounting standard to have limited impact, says LeasePlan
So says LeasePlan following the news last week that the International Accounting Standard’s Board has published the new standard.
Effective from January 2019, the new standard will effectively bring all lease activity onto a company’s balance sheet, as long as the company reports under the IFRS guidelines.
The aim of the change is to make it easier for investors and creditors to have an accurate view of a company’s balance sheet for credit and investment purposes. The new ‘Right of Use’ structure mandates a lessee to recognise both and asset and the corresponding liability of the lease payments on its balance sheet.
In response, LeasePlan has said it’s been monitoring this development closely throughout 2015, and over the coming weeks and months will work with customers to help them understand the change and that it means for them.
Managing director Matt Dyer added: “The change only applies to organisations that file under IFRS and not those under UKGAAP, meaning that a large contingent of UK companies will be unaffected.
“Secondly, many companies are likely to have a wide and varied lease portfolio, and will therefore already be used to diverse accounting treatment.
“It is also crucial to recognise that this only changes the way the leases are accounted for from a balance sheet perspective. It does not change the operational aspects of the lease arrangement. An operational lease will still provide benefits such as the certainty of fixed monthly payments, the removal of capital outlay for ‘heavy use’ assets, and additional services provided by the lessor.”