Lease accounting changes
Overview
In August 2010, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) issued a joint Exposure Draft (ED) proposing new accounting rules. Since the ED was published, substantial changes in the proposed rules have been discussed and agreed to by both Boards. It is expected that the changes will become effective on January 1, 2015.
Why are these changes being made?
Currently, lessees are required to show on their balance sheets the assets and liabilities stemming from finance/capital leases, but not for operating leases. Operating leases are considered off-balance sheet, and only limited disclosure in the footnotes is required for financial reporting purposes. The Boards believe that the existence of these two separate accounting standards makes it difficult for investors to understand and compare financial statements and could result in similar transactions being accounted for differently. As a result, the Boards concluded that certain fundamental changes are required and that the proposed changes address this issue. One example is that lessees will be required to present on their balance sheets all leases with a contract term of more than 12 months.
Who is affected?
Any organization that is required to comply with International Financial Reporting Standards (IFRS) or U.S. Generally Accepted Accounting Principles (U.S. GAAP) is affected by the proposed changes. For example, publicly traded companies in Europe and the U.S. and their subsidiaries are required to comply with IFRS or U.S. GAAP and are impacted by the proposed changes.
How is De Lage Landen preparing?
De Lage Landen has established a task force that is monitoring and addressing these changes internally, and helping our customers understand and navigate through the changes.
I have questions about the changes. Whom should I contact?
If you are a De Lage Landen partner, please contact your local De Lage Landen representative, or send your question in an e-mail to our lease accounting task force. Someone will respond to your e-mail within five (5) business days.
