1. European Federation of Accountants Fédération des Experts Comptables Européens www.fee.be Future of IFRS lease accounting : view of the accountancy profession Brussels, 5 November 2007 Richard Martin Accounting Working Party

2. European Federation of Accountants - Fédération des Experts Comptables Européens 2 The European Federation of Accountants  Umbrella body for the accountancy profession in Europe  Grouping 44 Member Bodies from 32 countries  Representing a combined membership of over 500.000 accountants  45% in public practice  55% in industry, commerce, government and education

3. European Federation of Accountants - Fédération des Experts Comptables Européens 3 FEE: Working for its 44 Members

4. European Federation of Accountants - Fédération des Experts Comptables Européens 4 FEE’s general positions on standards  FEE is committed to high quality, global, principles- based, neutral standards  Clear principles underpin a limited number of rules  Principles-based standards assist in responding appropriately to complex situations and new developments in business practice  IFRS and US convergence on new standards

5. European Federation of Accountants - Fédération des Experts Comptables Européens 5 Accounting for leases  FEE responded to the 2000 Discussion Paper  Remarks today must be preliminary observations, not reconsidered yet  General support for the principles of the change  Current situation is not very satisfactory  Concern that new model may not be much simpler

6. European Federation of Accountants - Fédération des Experts Comptables Européens 6 General issues  Appropriate version for SMEs  Importance to public sector  Financial reporting and tax effects – separate issues  Presentation issues for these new assets  Substance over form should not be lost  Auditability and subjectivity  Impacts of new assets and liabilities

7. European Federation of Accountants - Fédération des Experts Comptables Européens 7 Detailed issues – rules?  What is a lease?  Other sorts of executory contracts and arrangements  Fair values of the obligations or of the assets acquired?  Incremental borrowing rate or implicit rate  Minimum lease payments  Renewal options  Residual value guarantees  Contingent rentals  Price escalations

8. European Federation of Accountants - Fédération des Experts Comptables Européens 8 Detailed issues – rules?  Sale and leaseback  Lessors and lessees – mirror effects  Lessors – receivable and a residual

9. European Federation of Accountants - Fédération des Experts Comptables Européens 9 Conclusions  Sympathetic to the overall change  Principles-based, converged standard  FEE interested in the development of the new accounting

10. European Federation of Accountants - Fédération des Experts Comptables Européens 10 Visit us at FEE Avenue D’Auderghem 22-28 Tel: +32 2 285 40 85 1040 Brussels www.fee.be Fax: +32 2 231 11 12 Belgium Email: secretariat@fee.be