This website uses cookies primarily for visitor analytics. Certain pages will ask you to fill in contact details to receive additional information. On these pages you have the option of having the site log your details for future visits. Indicating you want the site to remember your details will place a cookie on your device. To view our full cookie policy, please click here. You can also view it at any time by going to our Contact Us page.

Accounting changes could escalate occupier debt

10 December 2009

A joint US and European proposal to standardise the way occupiers’ operating leases are treated in company accounts will dramatically increase the level of corporate debt held by many FTSE companies.

The proposal by the European wide International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) will see balance sheets balloon dramatically as operating leases will cease to be off-balance sheet.  The principal reason for the proposed changes is the classification between finance leases (on-balance sheet) and operating leases (off-balance sheet). Depending on the classification adopted, very similar transactions can be accounted for very differently. This reduces comparability for users of financial statements.
According to Ian Howarth, Head of National Business Advisory Services at Lambert Smith Hampton (LSH), the proposed changes will remove some of the benefits enjoyed by undertaking some transactions such as the sale and leaseback of assets. If the proposals are introduced, both historic and future sale and leaseback transactions will be shown on balance sheet. This may impact financial performance measures such as return on assets, debt to equity ratios and possibly loan covenants.
Howarth said: “In the future, occupiers will need to assess how the proposed changes will impact the way they hold and occupy real estate. The decision on whether to lease versus buy; the preferred length of leases, and whether to incorporate breaks, should be carefully considered as the proposed Standard is currently planned for 2011.”
LSH's 'Operating leases' briefing note highlights the proposed changes and identifies what the potential impacts may be, particularly for corporate occupiers of real estate.
To download LSH’s latest briefing note on the proposed accounting changes for operating leases  go to http://www.lsh.co.uk/images/cms/operating_leases_corporate2.pdf


Contact Details and Archive...

Print this page | E-mail this page

https://www.articbuildingservices.com/
https://www.bonahttps://www.bona.com/en/facility-solutions/.com/en/
PFM
https://www.aspenpumps.com/en-gb


MOST VIEWED...

View more articles
Article image

Relocation, relocation, relocation

We take a look at the trends and challenges affecting the relocation market...

...
Article image

Data-driven future

We take a look at the ways sensors and data are transforming FM......

Benchmarking maintenance

BSRIA has just published this year's operation and maintenance benchmarking report as a guide for building operators to evaluate their performance against ...
Article image

Dining with 14forty

14forty has opened a new restaurant in Oldham......
Article image

A night to remember

The PFM Awards are done and dusted for another year - and the winners are......
Article image

Fanning the flames

PFM explores how recent changes to UK legislation have impacted on fire safety measures within facilities in a post-Grenfell landscape......
https://www.idealstandard.co.uk/
https://www.floorbrite.co.uk/
https://www.asckey.com/
https://www.pfmawards.co.uk/
https://www.idealspec.co.uk/hygiene-redefined.html?utm_source=PFM&utm_medium=Newsletter+Banner&utm_campaign=Washroom+Ad+Campaign&utm_id=Washroom+Ad+Campaign&utm_term=October+2022
https://www.metrorod.co.uk/services/drain-maintenance-services/?utm_source=PFM&utm_medium=MPU&utm_campaign=PFM+MPU+-+Autumn+2022
https://www.articbuildingservices.com/
https://www.watco.co.uk/help-advice/watco-ebooks/guide-for-safety-underfoot-ebook-part1?utm_source=Premises+and+Facilities+Managment&utm_medium=Web+Banner&utm_campaign=RPFM_SU1eB