Submission to The Secretary-General, International Accounting Standards Committee.
20 November 2000
The Secretary-General, International Accounting Standards Committee
AICD Submission on G4+1 Position Paper - Leases
The Australian Institute of Company Directors (AICD) appreciates the opportunity of commenting on the Position Paper entitled, 'Leases: Implementation of a New Approach'.
The purpose of this letter is to pass on to you some views of company directors in Australia. The AICD represents over 15,000 company directors. These views on overall issues have been expressed by active company directors through the Accounting and Financial Advisory Committee of the AICD.
Rather than comment in detail on the Questions posed, some overall observations are presented.
1. The proposal to capitalize certain "operating" leases is viewed with some concern. It is considered that genuine operating leases should not be capitalized eg lease of floor space
2. The evolution of the basis of accounting has led to a movement from a cash basis to an accrual basis, incorporating substance over form. The proposals in the Position Paper seem to take that basis from accruals to a commitment basis. This general move is not supported.
3. Commitments can take many forms. On the expenditure side they can include:
- capital expenditure
- employment contracts
- purchase of raw materials
- supply of goods or services through purchase orders
4. On the revenue side, such commitments can include
- supply of goods under long term sale contracts eg. coal, iron ore
- receiving rent from space/a property under a lease agreement
5. The present accounting procedures of disclosure to cover (3) above seem adequate. Perhaps such disclosure could be extended to (4).
AICD would be pleased to discuss these matters further at your convenience.
Ian T Dunlop
Chief Executive Officer