The association’s comments follow the publication of a new study, “Economic Impacts of the Proposed Changes to Lease Accounting Standards”. Conducted by information and analysis provider IHS for the Equipment Leasing & Finance Foundation, an affiliate to ELFA, the research provides the first independent study to substantiate how the complex proposal might affect an already fragile US economy. It also indicates how other economies may be affected too.

Under the proposed lease accounting changes from the FASB and IASB, companies would be required to record virtually all leases on their balance sheets, including operational leases of fleet vehicles.

The study warns that the changes would result in lower earnings, reduced capital and deferred tax assets for companies that lease. It adds that these circumstances would result from the proposal’s front-ended cost pattern, in which companies would be required to front-load the cost of a lease in its early years rather than spread the average cost of the lease over its lifetime. 

It also said that the complexity of developing the new processes and implementing the new information technology infrastructure needed to ensure compliance with the new standards would represent a significant financial burden for many businesses.

William G Sutton, CAE, president and CEO of ELFA, said: ‘It is essential that the boards carefully consider comprehensive public input and comment before finalising their proposal to ensure a workable lease accounting standard. The Foundation study is the first comprehensive and objective analysis of the macroeconomic impacts of the lease accounting proposals under consideration by the Boards. It is our hope that the boards will seriously consider the negative consequences of some of these proposals and ultimately arrive at alternative approaches that do not harm American businesses and the US economy.’