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ELFA Issues Letter Opposing Lease Accounting Proposal to Boards

September 11, 2013, 07:00 AM

The Equipment Leasing and Finance Association (ELFA) raised serious concerns that a revised proposal to change lease accounting rules would increase the cost and complexity of lease accounting without significantly improving the quality and relevance of financial statements. In a letter to the Financial Accounting Standards Board and the International Accounting Standards Board (the Boards) on the second Exposure Draft of the proposed standard, ELFA concluded that it could not support the issuance of a final standard based on the revised proposal. The letter is available at

“Leases account for hundreds of billions of dollars in equipment acquisition annually, contributing not only to businesses’ success, but also to U.S. economic growth, manufacturing and jobs,” said William G. Sutton, CAE, ELFA President and CEO. “The primary reasons to lease equipment will remain intact despite the lease accounting proposal. However, it is essential that the standards setters carefully consider comprehensive public input during their re-deliberation period to ensure that if, indeed, a new standard is warranted, it does not harm American businesses and the U.S. economy. We call on the Boards to seriously examine the views and alternatives suggested by our comment letter as well as other comment letters and feedback they receive.”

ELFA’s comment letter argues that the proposed lease accounting rules are unnecessarily complex, create a significant compliance burden for lessees and lessors, and replace sound lessor accounting models with untried approaches that do not reflect the economics of the transaction. The letter cautions that financial reporting by both lessees and lessors will be less transparent and more difficult to understand under the proposal.

The letter highlights significant concerns, including the following:

  • The proposed new lessor accounting model is not based on user needs; rather, it reflects an attempt to make lessor and lessee accounting symmetrical without regard to lessor business models.
  • The proposed changes to lease accounting present compliance costs and unintended consequences for small- and mid-sized businesses that are unacceptable.
  • The new lease classification approach changes the lessee expense recognition pattern for equipment transactions (vs. property leases) from straight-line to front-loaded, which is inconsistent with the economics of the transaction.
  • The proposal will have a negative impact on the economy at large by increasing the cost of capital.

For more information about the Lease Accounting Project, visit the ELFA website at

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