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Industry faces £100m compliance charge

New accounting methods for the leasing industry being proposed by the Accounting Standards Board could hit dealers' balance sheets and cost the industry £100m, according to some estimates.

The accounting changes, which would abolish the difference between the balance sheet treatment of operating leases and finance leases, could come into effect by the end of next year. They would affect all corporate customers currently taking cars on contract hire and could lead to a wholesale rethink of fleet finance.

The changes would mean all lease vehicles would have to be 'on-balance sheet', significantly increasing the amount of capital employed in a business. Dealerships would be directly affected because all leased stock, including courtesy car and demonstrator fleets, would have to be shown on the balance sheet at full asset value.

Norman Donkin, British Vehicle Rental and Leasing Association director general, warned there would be major costs from the installation of completely new accounting and compliance systems and said the cost would be passed on in higher rental charges.

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