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The International Accounting Standards Board (IASB) have proposed changes that could mean that asset finance could be more difficult to obtain. The Finance and Leasing Association (FLA) advised this could impact heavily on the economies recovery as it relies heavily on investment in capital equipment. 

Currently businesses’ have to show the actual rent paid for equipment under an operating lease. Under new proposals they would have to prepare theoretical estimates of the value and cost of the lease and include these on their balance sheets.

Concerns have been raised over the effects of the extra administration that this would create for UK business owners. The proposed new rules could also reduce the availability finance for business for UK businesses as the proposed changes are not taking into account capital requirements regulations that are already in place.

The FLA said: “The IASB’s proposals involve taking real numbers and replacing them with a mish-mash of accountants’ assumptions, estimates and adjustments. To propose imposing these arcane and costly new regulations on UK businesses so soon after the recession makes no sense. The new rules could reduce the supply of funds available for new lending and contradict the government’s drive to cut unnecessary regulation. Today’s proposals appear to ignore the IASB’s own discussions on lessor accounting merely to permit convergence with the American accounting regulators.

“UK businesses, their investors and the government should join us in calling for the IASB to carry out a proper cost-benefit assessment and to drastically simplify its proposals.”

While this does not have a direct impact on invoice factoring companies it does create another concern for UK businesses looking to raise funds. Operating leases are often used to ease cash flow and as such more companies may find themselves in need of invoice finance.

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