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Wissenschaftlicher Aufsatz, 2011
2. Leasing in Light of Differences in Accounting Principles, such as HGB, U.S. GAAP and IFRS
3. Diverse handling of leasing in different countries
3.3. Great Britain
3.5. The Netherland
4. A comparison between IFRS, German GAAP and US-GAAP
Leasing is more and more understood as a modern form of financing of various assets, both in the commercial and the private sector. Leases have now become an integral part of economic life. With their multiple creative possibilities and variations, leases are an equitable alternative to buying and renting for companies.
The diversity of different forms of leasing, and the fact that there is no uniform lease contract as a reference, results in lease accounting being one of the most difficult areas of accounting under almost all jurisdictions.1 This diversity leads to an accounting system for leasing business with different possibilities to allocate positions in the P & L and balance sheet. Due to the lack of specific rules, leasing accounting is mostly based on general accounting principles.2 In Germany, relevant tax decrees have impact on the local accounting. Leases are, in principle, not fixed on legal contract types, and this allows temporary grant of use and utilization of liquidity-friendly financing alternatives in the balance-sheet. Since most major accounting systems presuppose exclusion of pending transactions from the balance sheet,3 companies used contracts for grant of use, such as lease, deliberately to influence the accounting. For example, sale and leaseback transactions are used to reduce the balance-sheet debt, though the physical property mapping has not changed.4
The current lease accounting under IFRS 17 of the IASB is to be understood as a reaction to the existing situation in the various accounting systems. The aim of the standard setter was to capture the major part of the grant of use in the balance sheet. All postings, which change the asset allocation similar to an investment, should also be accounted as such.5 The concept of economic ownership divides any grant of use in leasing into two classes. The finance leases which, simply put, means all long-term and investment-like grants of use, and operating leases, which are any other grants of use. This was still not sufficient for IASB members. Therefore chaired by Warren McGregor, the IASB issued a joint project with the U.S. Federal Accounting Standards Board (FASB), and since 2006, the lease accounting is on the agenda as an active reform project. Basis for reform efforts was the so- called McGregor paper of 1996.6
The central goal of this work is to present under the focus of the International Lease Accounting an overview of different treatment in major industrial countries and end with comparison between the treatment in Germany, US and countries / users using IFRS rules.
The American accounting rules are regulated by the U.S. GAAP, (the Generally Accepted Accounting Principles). The FASB has drawn up a very comprehensive set of rules for leasing issues because of the great importance of the lease as a financing instrument.7 Leases are regulated in STAS 13 "Accounting Polices" and EITF 90-15, "Impact of Non-substantive Lessors, Residual Value Guarantees, and Other Provisions in Leasing Transactions ".
By way of the IFRS there is a clear rule in IFRS 17 about International Leasing Accounting. However, in the German Leasing Rules are no detailed accounting rules. Rather, it relies on tax decrees that are relevant to the commercial law.
U.S. GAAP and IAS both use the economic approach as the basis for asset allocation. The allocation is distinguished on the one side by capital leases (U.S. GAAP), or respectively finance lease (IAS), and on the other side by operating leases.
With capital leasing or finance leasing, a credit-financed purchase by the lessee is assumed and the risks and rewards for the leased article are essentially transferred to him. It ultimately does not depend on the transfer of ownership, since the principal risks and rewards can also be transferred to the lessee, if he is never the legal owner of the object. The classification as capital or finance leasing thus follows an economic qualification of opportunities to use the leased asset. In capital or finance leasing, the lessee activates the leased asset. All other leases are classified under U.S. GAAP and IAS by negative amortization as an operating lease. The leased asset is then, as with typical leases, activated by the lessor.
U.S. GAAP and IAS capital or finance leasing and operating leasing are defined in the same way. The criteria of demarcation, however, differ in detail and strictness of regulation.8 In the German Commercial Code, leases are not explicitly dealt with under its accounting rules. The rather general approach of the Commercial Code's rules for traders is applied. All assets of the traders have to be allocated where it has beneficial ownership.9 In absence of a precise definition of commercial criteria, in Germany the quantitative tax differentiation is also used for the commercial evaluation.10 The landmark decision of the Federal Finance Court (Bundesfinanzhof) on 26/01/1970 set a precedent. The verdict later became known as the lease decision of the BFH, and has made it clear that the tax assessment is crucial for leases, and not the selected civil contract form of the leasing parties. Because of the connection to the tax law in economic matters, only the economic approach should be applied. By relying on the above BFH ruling, the Federal Ministry of Finance defined the treatment of leasing income of movable and immovable assets by decree of 04/19/197111 and 03/21/1972.12 Following were further BMF decrees to the full and partial payback agreements. Since the commercial accounting principle in general follows the tax allocation principles because of its inverse dependency, German accounting is made in accordance with German leasing decrees.
The following table shows the main differences between IAS 17, FAS 13 and German accounting:
For lease agreements or lease contracts in Germany, there are neither specific commercial nor civil standards. The HGB shall continue to contain no clear rules for lease accounting.
Therefore, in practice, tax regulations issued by the Federal Ministry of Finance as well as relevant law cases are used13. Civil law treats lease contracts the same as rental agreements as defined in the Civil Code (BGB), even when connected to a call option.14 In principle, a clear delineation and definition of the concept of leasing has been difficult up to today. It is often controversial, whether “Leasing” is a rental, a hire purchase, a loan agreement, or a treaty of its own. Lease contracts are generally subject to the same basic idea. They allow the lessee, for a definite or indefinite period, the use of one or more movable or immovable objects against periodic lease payments. According to the tax law decrees of the Ministry of Finance, there is, therefore a distinction between operating leases and finance leases. The classification of a lease as an operating or a finance lease follows the principles of jurisprudence of the Federal Finance Court (BFH IV R 144/66 of 26.01.1970; BStBl II 1970, S. 264). The starting point for this classification is the determination of the non-cancelable lease term and the usual life span of the leased property. If no further options are agreed upon, the lessee is always attributed as the beneficial owner of the leased asset when the lease term is greater than 90% or less than 40% of the usual life span. If the lease period is less than 40% of its usual life span, and the lessee is ready to pay the entire acquisition and production costs of the lessor and his associated costs (including mark-ups) within a relatively short period of time, the financial administration views this as a hidden hire purchase and no longer as a lease. If the lease term contains more than 90% of its life span, then the lessor cannot use the asset for almost its entire life span. Thus, the lessee is to be regarded as the beneficial owner based on the rules of § 39 AO.
If the lessee has an option in the contract to purchase or renew the lease, and the basic term is between 40% and 90% of the usual life span, then it has to be assessed (based on the likelihood of exercising the option) whether the lessor is permanently excluded from using the asset or not. If the purchase price or renewed rent is below the true value of the asset and it can be assumed that the lessee will exercise his option, the leasing object is in principle attributable to the lessee. In contracts with a purchase option the financial administration expects that the lessee will exercise his option if the agreed purchase price is lower than the calculated book value after application of the linear depreciation according to the official depreciation table, or is lower than the lowest market value at the time of sale.
1 Kieso, D.E.; Weygandt, J.J.: Intermediate Accounting, New York 1995, S. 1152 ff.
2 Küting, K.; Figge, H.: Mobilien-Leasing in der Handels- und Steuerbilanz, 1999 S. 361 ff.
3 Vgl. zum Postulat der Nichtbilanzierung schwebender Geschäfte: Biergans E: Die einkommen- und körperschaftsteuerliche Behandlung der Einlagen von originalen immateriellen Wirtschaftsgütern, Nutzungsrechten und Nutzungen in: DStR 1989 S. 367 ff.; Döllerer G: Leasing- wirtschaftliches Eigentum oder Nutzungsrecht in: Betriebs-Berater 1971, S. 535 ff.
4 Hennessy J. L.: Recording of Lease Obligations and Related Property Rights in: Journal of Accountancy 1961, S. 42; Hall W.D.: Current Problems in Accounting for Leases in: Journal of Accounting 1967 S. 35 ff. Hennessy J. L., a.a.D. S. 40 ff.
5 Oversberg in KoR 2007, S. 376
6 Mc Gregor W. (1966 a): Accounting for Leases: A New Approach, Norwalk, CT
7 Reichertz R.; Frey D: Die Bilanzierung von Leasingverträgen nach US-GAAP, in: WPg 1997 S. 662
8 Hayn S.: Internationale Rechnungslegung, 1998, S. 453 ff.
9 Doll R.-P. in: Bohl W. / Riese J. / Schlüter J.; Beck’sches IFRS-Handbuch, Kommentierung der IAS / IFRS, 17 S. 785
10 Budole W; D / Karig K. P. Leasing in: Beck’sches Bilanz-Kommentator; Der Jahresabschluss nach Handels- und Steuerrecht; München 1995, S. 90 ff
11 BMF-Schreiben v. 19.04.1971 in BStBl I 1971 S. 265 ff.
12 BMF-Schreiben v. 21.03.1972 in: BStBl I 1972 S. 188 ff.
13 Melling W.; Weinstock, M.; Die Zurechnung von mobilen Leasingobjekten nach deutschem Handelsrecht und den Vorschriften der IASC in: DB 1996, S. 2348
14 Creifelds; Rechtswörterbuch, 14. Auflage; S. 784
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