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 global impact of the standard is expected to require companies reporting under US GAAP and IFRS to now record trillions of dollars of new assets and liabilities.
According to the quarterly Grant Thornton International Business Report (IBR), the average business holds 20 leases. The average was highest in Sweden (68 leases per business), followed by Japan (49 leases per business), Finland (39 leases per business) and Australia (25 leases per business).
Awareness of the change was greatest in the US (75%), India (70%), Chile (60%) and the UK (56%), and was lowest in Lithuania (8%), France (13%), Brazil (13%) and mainland China (13%).
47% of businesses indicated their support for the pending changes, with 33% opposed.
Ed Nusbaum, Grant Thornton International Ltd. CEO said, 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.
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.
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.
Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 12,500 businesses per year across 44 economies. This unique survey draws upon 21 years of trend data for most European participants and 10 years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com
Data collection
Data collection is managed by Grant Thornton International's core research partner -Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone.
Sample
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 6,400 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted between August and December 2012.
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