The Equipment Leasing and Finance Association (ELFA) released a statement addressing proposed revisions to lease accounting standards put forth by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).
The revisions are discussed in the paper Leases: Preliminary Views as part of the FASB’s and IASV’s lease accounting project.
The paper serves as a roadmap to a standard that will replace Statement of Financial Accounting Standards No. 13, Accounting for Leases (FAS 13), which governs the accounting for commercial lease transactions in the U.S.
In a letter to IASB and FASB, ELFA President Kenneth Bentsen said his association supports the intent of the proposals that improve the clarity in financial reporting, but has major concerns about its details.
The proposed model, Bentsen said, is too complex and will not result in any significant improvement in financial information, among other criticisms.
Bentsen also said that the proposed model is so close to the current Generally Accepted Accounting Principles that is would be more efficient to amend IAS 17/FAS 13 to capitalize operating leases and leave capital lease accounting and the profit and loss statement accounting for operating leases unchanged.
A list of ELFA’s other specific concerns include the fact that the proposed rules do not reflect the economic differences between rental contracts and a purchase financed by a loan. This hinders representational faithfulness in financial reporting. The group also said that the proposed rules are overly complex and contingent rents should not be estimated and capitalized unless they are “disguised” minimum lease payments. A de minimus exception is needed and that lessor accounting must be addressed.