Fleet News

Accounting rule change may affect leasing in UK

FINANCE directors should keep a watching brief on new legislation which could have a huge impact on the leasing industry, experts have warned.

Many fleets feared that new international accounting laws, called the International Financial Reporting Standards (IFRS), could force them to record contract-hired vehicles on their own balance sheets in the near future.

However, leasing and accountancy companies have moved to reassure fleets that they may not immediately have to rethink their policies yet but may have to before the end of the decade.

Not having depreciating assets such as cars and vans on the balance sheet is an attractive proposition to companies as it improves their financial figures. Leasing firm LeasePlan UK’s financial director, John Boon, said: ‘There is a planned refinement to the leasing standard that could move assets obtained under an operating lease on to the balance sheet. However, this is a research project, still in its early stages and developments could be years away.’

Boon added: ‘The proposal to regulate leases across Europe, which would include operating leases going on balance sheets, appeared in a discussion paper in 1999. However, issues such as the restructuring of the Accounting Standards Board and continuing uncertainty over how assets are measured have led to delays in implementation.

‘If this new approach is going to make it into legislation, it will require extensive consultation and major transition period. As yet, contract hire remains a useful choice for companies who wish to take their fleets off the balance sheet.’

The British Vehicle Rental and Leasing Association (BVRLA) said the plans were ‘someway down the International Accounting Standards Board agenda’. PricewaterhouseCoopers director John Williamson said although it was unlikely such assets would have to show up on balance sheets over the next two to three years, it could become law after that.

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