Future of IFRS lease accounting : view of the accountancy profession

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Future of IFRS lease accounting view of the
accountancy profession

• Brussels, 5 November 2007
• Richard Martin
• Accounting Working Party

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The European Federation of Accountants

• Umbrella body for the accountancy profession in
  Europe
• Grouping 44 Member Bodies from 32 countries
• Representing a combined membership of over
  500.000 accountants
• 45 in public practice
• 55 in industry, commerce, government and
  education

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FEE Working for its 44 Members
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FEEs general positions on standards

• FEE is committed to high quality, global,
  principles-based, neutral standards
• Clear principles underpin a limited number of
  rules
• Principles-based standards assist in responding
  appropriately to complex situations and new
  developments in business practice
• IFRS and US convergence on new standards

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Accounting for leases

• FEE responded to the 2000 Discussion Paper
• Remarks today must be preliminary observations,
  not reconsidered yet
• General support for the principles of the change
• Current situation is not very satisfactory
• Concern that new model may not be much simpler

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General issues

• Appropriate version for SMEs
• Importance to public sector
• Financial reporting and tax effects separate
  issues
• Presentation issues for these new assets
• Substance over form should not be lost
• Auditability and subjectivity
• Impacts of new assets and liabilities

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Detailed issues rules?

• What is a lease?
• Other sorts of executory contracts and
  arrangements
• Fair values of the obligations or of the assets
  acquired?
• Incremental borrowing rate or implicit rate
• Minimum lease payments
• Renewal options
• Residual value guarantees
• Contingent rentals
• Price escalations

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Detailed issues rules?

• Sale and leaseback
• Lessors and lessees mirror effects
• Lessors receivable and a residual

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Conclusions

• Sympathetic to the overall change
• Principles-based, converged standard
• FEE interested in the development of the new
  accounting

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www.fee.be Fax [phone]
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