Balance Sheets to Swell $2.8 Trillion as Leasing Rules Tighten
- More than 85% of $3.3 Trillion leases is off balance sheet
- Leasing is a form of borrowing, should be reported, IASB says
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Users of leased assets such as airlines and chain stores will have to account for them in their financial statements, bringing at least $2.8 trillion of leases out of the footnotes and on to balance sheets under new accounting rules.
A standard issued by the International Accounting Standards Board replaces reporting requirements for leases introduced more than 30 years ago which it says are no longer considered fit for the purpose. That’s because the current standard allows companies to put leases into different categories, only one of which has to be reported on the balance sheet, while the rest can remain in the footnotes.