What can businesses do?
There is a 120-day comment period. Lessees and lessee groups—including construction companies —and their financing partners should submit a comment letter prior to the Sept. 13, 2013, deadline. Only then will the standards-setting bodies be aware of the real-life business impact if these rules changes are adopted. A link to the Exposure Draft and tips for submitting an effective comment letter are available on the Equipment Leasing and Finance Association’s website at www.elfaonline.org/Issues/Accounting/.
You may consider including the following points in your comment letter:
- A straight-line expense pattern for profit-and-loss reporting more truly reflects the economics of a true lease/operating lease.
- Lease classification and balance sheet presentation based on the legal treatment in bankruptcy of leases is important for users of financial statements.
- An unnecessarily complex set of accounting rules is not in the best interest of businesses wishing to sustain themselves in a challenging economic environment.
Leases account for hundreds of billions of dollars in equipment acquisition annually, contributing not only to businesses’ success, but also to U.S. economic growth, manufacturing and jobs. The good news is that there are many benefits to leasing, and the primary reasons to lease equipment will remain intact despite the lease accounting proposal, from maintaining cash flow, to preserving capital, to obtaining flexible financial solutions, to avoiding obsolescence.
But, it is essential that the Boards carefully consider comprehensive public input and comment before finalizing their proposal to ensure a workable lease accounting standard. 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 U.S. economy.
William G. Sutton, CAE, is President and CEO of the Equipment Leasing and Finance Association, the trade association that represents companies in the $725 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA has been equipping business for success for more than 50 years. For more information, please visit www.ELFAOnline.org. Follow ELFA on Twitter @elfaonline.
William Bosco, a member of the IASB/FASB International Working Group on lease accounting and an accounting policy consultant for ELFA, contributed to this article.