Accounting chief says leases reform in danger

LONDON Tue Nov 6, 2012 1:35pm EST

LONDON (Reuters) - Corporate lobbying is on the verge of derailing an attempt by regulators to make companies account more clearly for leased equipment, the head of a global accounting rules body said on Tuesday.

The International Accounting Standards Board and its U.S. counterpart, the Financial Accounting Standards Board, agreed in June to require companies to put leases longer than a year on their balance sheets.

The aim is to give investors a clearer picture of financial exposures as firms lease much of the equipment they use to run their business, from airplanes to photocopiers.

Currently the costs, estimated at over $1 trillion globally, are tucked away in disclosures, but companies fear investors will take fright at swollen balance sheets which could raise borrowing costs.

The IASB and FASB will consult early next year on the rule which is due to come into force around 2016, but the industry is mounting a fierce rearguard campaign to scrap the change.

"The fact is we are still facing an uphill battle. We will need all the help we can get to ensure that we do not get lobbied off course," IASB Chairman Hans Hoogervorst told students at the London School of Economics on Tuesday.

The U.S. Chamber of Commerce says the change would cost 190,000 jobs, while 60 members of Congress warned in May of "disastrous consequences".

Leaseurope, whose members granted new leases worth 224 billion euros last year, is also hostile.

"After six years of re-deliberations, we consider that the proposals due to be re-exposed are not an improvement over the existing leases standard and do not warrant the cost and burden of change," Leaseurope said in a letter to the IASB last month.

Hoogervorst called on national accounting bodies, regulators like the U.S. Securities and Exchange Commission and investors to speak up for the greater transparency the rule would bring.

"We really need their vocal support to counter what is a well-funded and well-resourced lobbying campaign," he said.

Hoogervorst's predecessor, David Tweedie, once said he wanted to cross the Atlantic in a British Airways plane that was on the airline's balance sheet.

Under the proposed rule, all leases lasting over a year would be on balance sheet.

After earlier opposition, the boards dropped their plan for equipment and property leases to be treated in the same way. Costs on equipment leases would now be "front loaded", while those for property spread across the life of the contract.

Another retreat would cast further doubt over attempts to create a global set of accounting standards as requested for the fourth time in three years on Monday by the world's leading economies (G20).

(Reporting by Huw Jones)

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