Upcoming changes to accounting standards will devastate companies balance sheets - GDP to decrease by ~3% 11/16/2013 - 00:00 ONE of the world’s biggest accountants, PwC, breathlessly bills it as perhaps “the biggest-ever accounting change”. Businesses that lease property and equipment may soon have to start treating the leases as liabilities on their balance-sheets. All sorts of outfits that make heavy use of leasing—from retailers to airlines and, indeed, professional-services firms such as accountants—may end up looking far more indebted than their books currently show. Opponents of the reform predict dire consequences, for the companies and for the economy.When a business borrows money to buy a machine, the loan or bond payments are recorded on its books as a liability, and the machine as an asset. If, instead, it leases that machine, it also gains possession of an asset in return for a stream of outgoing payments; but current rules usually let the firm keep both the asset and the liability off its balance-sheet. It has to add only a brief footnote containing scant details of its overall lease obligations.
