The European Financial Reporting Advisory Group (EFRAG) wants to see several changes to the International Accounting Standard Board's (IASB's) proposals on lease accounting before the standard is finalised.

In its final response letter to ,i>Exposure Draft/2013/6 Leases, EFRAG says it agrees that more lease arrangements should be recognised by lessees in their statement of financial position, and remains 'supportive' for the project. However EFRAG says it disagrees with the proposed dual measurement model for lessees, and also believes that the receivable and residual model raises issues that need to be investigated.

In addition, EFRAG says it believes that the proposals are far from reaching an appropriate cost-benefit balance and that significant simplifications are needed, such as exempting numerous small ticket lease arrangements from the requirements and strengthening the application of materiality when accounting for leases.

In its response, EFRAG comments that the ED 'reflects significant improvements in the accounting for leases'. However it raises a number of concerns around the application of the right-of-use model, which it describes as 'a new approach, which has never been debated on a conceptual level'.

EFRAG says: 'We are not convinced that the focus on liability recognition has led to capturing the right population to which the right-of-use model should be applied.'

EFRAG is concerned that the right-of-use model will not be understandable to users, which will add to the perception that this approach is unduly complex. It recommends that the IASB refines the definition of 'right-of-use' (and how this right is distinguished from other rights bundled in an asset) as part of its conceptual framework project.

Among other things, EFRAG would also like the IASB to 'refine' guidance to identify what activities convey the ability to direct the use of an asset and how this links with the business models of lessors, saying there is a 'lack of clarity in the conceptual model'.