Proposed Changes To Lease Accounting Makes Leasing Less Attractive

Thursday, 20. August 2009

A warning to business users has been issued regarding proposed changes to the way that leases are accounted for. Currently if you lease a car the cost simply appears as an expense in the profit and loss account and notes regarding commitments in the accounts notes. However, new accounting proposals will see all leased assets appear on the balance sheet as assets (having use of the asset) and liabilities (paying for its lease). More details have yet to emerge but many of the leasing big hitters remain opposed to the move as they believe it to be unnecessary and an accounting expense for smaller businesses that may put them off leasing. As the new rules are set to come into force in 2011 small businesses considering 3 year leases might be wise to find out a little more about the effects on their accounts. By Graham Hill