New ELFA resources for leasing standard changes

With the new leasing standard update from the Financial Accounting Standards Board (FASB) now in the public domain, the Equipment Leasing and Finance Association (ELFA) has released a host of new user-friendly tools designed to help lessors and lessees prepare for the changes to the accounting rules.

“Now is the time to prepare for the transition to the new lease accounting rules,” said ELFA president and CEO Ralph Petta. “ELFA is pleased to offer new resources to help our members understand and plan for what’s in the rules and educate their sales teams, vendor partners and end-users about the changes.”

The association is encouraging businesses to start thinking now about the implications of the standard, which takes effect in 2019 for public companies and a year later for private firms. The resources reveal that although the rules will change how operating leases are accounted for on corporate balance sheets, they will not diminish the many benefits of leasing and financing equipment.

Tools for Lessors

The following resources are designed to bring ELFA members and other stakeholders up-to-speed on what is changing and plan for the transition:

• FAQ: Answers to Your Questions About the New Rules
• Top 6 Tips for Lessors to Prepare for the New Rules
• White Paper: Navigating the New Lease Accounting Standard – Learn what’s new in the rules; what the implications are; and what lessees and lessors need to do to prepare for the transition.
• White Paper: Changes in Lease Accounting – Understand changes in the new rules; educate your sales teams, vendor partners and end-users about the rules; and allay potential customer concerns about the impending changes.

Tools for Lessees

The following resources are customer-ready so that ELFA members may share them directly with end-users and other stakeholders:

• FAQ: Answers to Your Questions About the New Rules
• Top 5 Tips for Lessees to Prepare for the New Rules
• Infographic: Top 5 Tips to Prepare for the New Lease Accounting Rules

ELFA has planned a number of events to educate industry participants about the new lease accounting rules, and details of these plus the full toolkit, are available on its website.

Standard dissent

While ELFA, and a number of other stakeholders, have indicated the new leasing standard is broadly in line with expectations, one of FASB’s own members has criticised the approach taken.

While the other six board members voted to affirm the standard, FASB’s commentary on the release indicates that long-time member Marc Siegel was not in full agreement with the guidance published.

FASB said: “While Mr. Siegel firmly agrees with the recognition of lease assets and liabilities for all leases, he believes that the measurement of the lessee’s liability required by the guidance will provide insufficient decision-useful information for investors, such that significant adjustments will continue to be made by financial statement users.”

Siegel is critical of the guidance on renewal options and variable lease payments, on the basis it is inconsistent with other accounting requirements, and so the new leasing standard does not provide enough useful information about the amount, timing, and uncertainty of cash flows arising from a lease’.

The Chartered Financial Analysts (CFA) Institute, for its part, has indicated it would prefer the approach taken by the International Accounting Standards Board (IASB), which has been working with FASB on a lease accounting convergence project for over a decade, but has taken a different view on measurement in its version of the new standard, released at the end of January.

Sandy Peters, head of the global financial reporting policy group at the CFA Institute, said: “We’re happy to see that there are liabilities, but we’re not thrilled with the measurement of the liability. We agree more with the IASB’s amortization approach rather than the FASB’s. They have the amortization and then they have the sort of straight-line approach”.

“There’s a level approach under the FASB model and then there is the sort of right-of-use approach. You’re going to split it up and show what is the amortization of the asset, what’s the interest, all those sorts of things. We like the single approach adopted by the IASB better,” she explained.