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Grant Thornton: Pending lease accounting changes

By Rob Starr, Content Manager, Big4.com

According to the quarterly Grant Thornton International Business Report (IBR), the average business holds 20 leases. The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) are set to publish revised proposals for a new lease accounting standard but a survey of 3,450 businesses in 44 economies finds that, although 78% hold leases, only 42% are aware of these proposed global changes that could drastically alter their balance sheet.

The survey was conducted by Experian in November and December 2012 as part of the quarterly Grant Thornton International Business Report with 3,450 respondents in 44 economies.

“We welcome efforts to improve the definition of a lease in order to distinguish leases from service contracts and address concerns about front-loaded expense recognition. The key question now is whether these changes address constituents’ concerns sufficiently to enable the project to move forward – if not then a reboot will be needed,” said Ed Nusbaum, Grant Thornton International Ltd. CEO.

“We have said earlier that the lack of transparency around operating leases needs to be addressed.  The information in the financial statements currently does not provide complete, readily understandable information about the obligations associated with operating leases. But change for the sake of change is not the goal. A new standard that is not based on clear, consistent principles could actually make things worse. A major change to lease accounting is a once in a generation event and the Boards need to be patient to get things right.”

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