Research by global advisory firm KPMG suggests that new lease accounting proposals which would bring most leases on-balance sheet for lessees could add over US$100 billion of debt on the balance sheets of the top 20 global airlines and about US$80 billion on to the balance sheets of the world’s 50 biggest shipping companies.*
The proposals by the IASB and FASB, published in May 2013, represent a major shake-up of lease accounting and would have a significant impact on airlines, aviation financiers as well as the shipping industry. Two separate reports published by KPMG today – Leases: Final Approach or Go-around and Shipping Insights – Bigger Balance Sheets - take a closer look at the proposals and examine their potentially wide ranging impact on the airline and shipping industry.
John Luke, Lead Partner at KPMG’s global transport practice comments: “This is on of the most far-reaching accounting shake-ups proposed since IFRS was widely adopted. If these proposals come into effect in 2017 the consequences particularly for the airline and shipping industry will be far-reaching. If companies have to add billions of pounds of debt on to their balance sheets, it will ultimately affect banking covenants, taxation and possibly the ability to pay dividends.
“Key questions all lessees and lessors need to ask themselves now are how the new rules would affect them, whether their systems and people are up to task and how the new requirements would affect their leasing products. We also encourage all interested parties to send their comments on the proposals to the IASB and FASB before the September deadline.”
Key implications of proposals for the airline sector:
Key implications for the shipping industry:
*Note to editors:
The analysis for the airline sector is based on the latest publicly available financial accounts of the top 20 global airlines. The analysis for the shipping sector is based on a survey of the world’s 50 largest global shipping companies and looked at the FY 10/11 financial reports. The survey was published in KPMG’s Shipping Insights 4, December 2011.
For further information please contact:
KPMG Press office
Tel: +44 (0) 207 694 8773
Katrin Boettger, KPMG Corporate Communications
Mobile: 0782 4475168
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.