International accountant and shipping consultant Moore Stephens has reminded the shipping industry that it has until July 17 this year to respond to an International Accounting Standards Board (IASB) discussion paper on the accounting treatment of leases. “Although it is likely to be at least two years before any new standard comes into effect, the big decisions on what will constitute that standard will be made now,” says Richard Greiner, a partner with the Moore Stephens shipping group. “For that reason, it is important that shipping makes its voice heard before the discussion paper deadline, and it is encouraging to see that the Chamber of Shipping, as the trade association for the UK shipping industry, has canvassed its members about the possibility of making a submission to the IASB.”
The discussion paper, which deals primarily with leases from the perspective of the lessee, has been prompted by the IASB view that operating leases, using the existing definition, give rise to assets and liabilities which are not currently reflected in financial statements. The IASB also says that the differences between operating and finance leases are often quite small, yet the accounting treatment adopted for each is fundamentally different. It also notes that, as a result, it may be possible to structure a lease so that the underlying financing obligations are not recorded as a liability on the balance sheet.