Lease rules to add £73.7bn to FTSE 100 balance sheets

THE UK’s largest companies will bring an extra £73.7bn in new assets and liabilities on to their balance sheets if new lease accounting proposals come into effect, a lease-industry trade body has warned.

The new accounting proposals, released by the International Accounting Standards Board (IASB), may force companies to publish their lease commitments in their published accounts.

The board aims to demystify lease accounting in a move which could force major lessees and lessors to recognise their leases in the form of greater assets and liabilities.

The Finance and Leasing Association (FLA), which has campaigned against the changes, estimate the rules will bring an extra £73.7bn on to the books of FTSE 100 companies.

“We believe that the benefits of the proposals as they stand are very unlikely to outweigh the costs,” the body said in its submission.

The IASB hopes to bring all leases commitments on to the balance sheets in order to provide investors with a more accurate and transparent picture of company finances.

The rules will likely affect major transportation and property companies, including major retailers which have to lease property to house their stores.

HM Revenue and Customs has estimated the switch-over cost will come to £100 million for UK companies with an extra on-going administrative cost of about £50 million per year.


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Fiona Westwood of Smith and Williamson.