Published by financial reporting think tank the Accounting Standards Board, the proposals initially caused concern among the leasing industry because they will radically alter the balance sheets of some of their clients. But after studying the plans leasing chiefs have dismissed the proposals as 'nonsensical' and claimed they were unlikely to be adopted, and have little effect even if they were.
Outlined in a 'discussion document', the proposals are designed to ensure that all leased assets appear on company balance sheets. The current financial reporting regulations allow all leased assets for which the lessee pays less than 90% of the value to remain off balance sheet as 'operating leases'. In the case of cars (companies pay less than 90% of the value of the vehicle over the duration of a contract) the vehicles remain off balance sheet.
BVRLA secretary general Norman Donkin said the principal attractions of contract hire and leasing lay in reduced administration, known, fixed-cost financing and the transfer of residual value and maintenance risks. 'If it did happen, it wouldn't have much impact because off-balance sheet treatment is not the primary attraction of leasing cars,' he said.