The new lease accounting standards proposed by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) may have come at a wrong time as only 7 percent of the companies polled by Deloitte said they are ready to comply with new regulations.

As early as it was introduced in August 2010, the proposals for new accounting standards have already met doubts from KPMG and the British Vehicle Rental and Leasing Association (BVRLA) that it could offer a more transparent and simpler approach to accounting.

KPMG said the proposals are complex and that the multiple approaches and rules would probably remain an issue with companies while (BVRLA) considered it an ignorance to the call of several businesses to make accounting standards as simple as possible particularly with short-term, low-value leases.

The recent survey conducted by Deloitte showed a similar response from across industries.

More than 80 percent said the proposed lease accounting standards which is to be implemented by the middle of 2011 will add burden to the financial reporting of tenants and property owners.

Meanwhile, 40 percent said the proposals will make it more difficult for them to obtain financing and another 40 percent said the new accounting standards would result in a shorter-term leases.

Asked whether the integrity of their companys lease data is reliable, only 35 percent responded with confidence.

Approximately 25 percent believed the new accounting standards would necessarily require their companies to upgrade their IT systems to accommodate the proposals while 20 percent said they will replace their existing systems.

Only 21 percent expressed confidence their existing IT systems could cope with the proposed accounting standards for leasing.

Bob OBrien, vice chairman and real estate services leader for Deloitte LLP, said both the balance sheet and tenant strategy and execution of the real estate sector will see the major impact of the new lease accounting standards while owners and operators, he added, will see changes in the demand from their tenants.

Shorter-term leases may be in high demand along with an increased tenant appetite to forego renting in favor of buying, he said.

According to OBrien, the new lease accounting standards will force real estate companies to implement major changes in their operations and re-examine their capital expenditures on new leases, enhanced lease administration and forecasting systems.

Source: http://inaudit.com/reports/deloitte-survey-only-7pc-of-companies-confident-to-comply-with-new-lease-accounting-standards-4941/