Many investors support proposals by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to reform lease accounting by capitalising all leases on the balance sheet and their views should be given greater weight in the current consultation, according to the CFA Institute.
The institute, which represents a global community of more than 100,000 investment professionals, says that if leases are capitalised on the balance sheet, this will enhance transparency for investors and improve the comparability of financial statements across the world. It argues that failure to include leasing assets and liabilities on the balance sheet causes investors to 'guesstimate' lease obligations on a widespread scale, and with a variation in the range of analysts' figures.
A recent survey of CFA Institute members showed that 55% of respondents support the lease accounting proposals to bring operating leases onto the balance sheet, while 37% want to see improved disclosures. Only 8% oppose any change.
While the results suggest a split in views between those who currently capitalise operating leases and those who do not, the CFA says the overall preference remains for bringing leases on balance sheet, with three quarters of respondents in favour.
Half (52%) of survey respondents expect that preparers' cost to implement the standard will be less than the cost incurred by investors/analysts in estimating leverage whilst making analytical adjustments. Only 29% expect preparer costs to be greater than costs incurred by investors whilst estimating leverage.
Vincent Papa, director of financial reporting policy at CFA Institute said: 'Investor sentiment should not only be visible in order to present a balanced view of reactions to the proposals from various stakeholder groups but should be prioritised. After all this is about letting them do their jobs better.'
The CFA Institute says it does not expect a final standard to be issued until 2014 at the earliest, which implies a likely effective date of January 2017, or later.
