Discussion On The Impacts Of New Accounting Standards On Lessee's Financial Assessment In Chinese Financing Leasing Industry

Since the 1980 s,it is common practice in developed countries that enterprises use lease as the tool of off-balance sheet financing..However,it is known that off-balance-sheet financing concealed key financial information,which is likely to mislead the financial information users.The Enron scandal,revealed in 2001,eventually led to the reconsideration of the lease accounting,and initiated a joint project by FASB and IASB to establish a new approach to lease accounting.On January 13 th,2016,IASB issued the latest guidelines on international accounting "lease" standards,and announced that this version will take effect on January 1st,2019.Previously,FASB has also released its latest version of the US GAAP,which will be in execution on December 15 th,2018.The most significant feature of these new standards is to make clear that all of the leased asset needs to be put in the balance sheet,and propose the operating leases and financial leases are no longer distinguished in the lessee accounting measurement.Although the new guidelines can patch the issues on the off-balance-sheet financing relatively completely,in the meanwhile,it is also inevitable to cause a chain reaction.This dissertation,in both qualitative and quantitative measurements,provided a detailed analysis on multiple unfavorable impacts that these new "lease" guidelines would bring to lessee enterprises in financing leasing industry in our country.After the implementation of the new international accounting “lease” standards,the most direct impact would be the decrease of the financial evaluation on lessee.Both Financial indicators in debt category(such as asset-liability ratio,leverage ratio,capital adequacy ratio,etc.)and lessee profitability indicators(such as operating margin,rate of return on equity,rate of return on assets,etc.)will worsen.Its more substantial impact on enterprises reflects in various aspects of lessee's operation,including investment,financing,taxation,management and so on.In the aspect of investment decision-making,the lessee would prefer to buy rather than to lease;in the aspect of debt financing,it becomes notably more difficult for the lessee to obtain financing from creditors;in the aspect of equity financing,the difficulty in gaining approval from creditor would increase because of the earnings performance decline;in the aspect of taxation,it is very likely that the lessee may face increased tax burdens;in the aspect of financial management,under the new guidelines the lessee's financial management system will require systemic transformation.Based on the above analysis,to respond to the practical problems that the industry is facing right now,this paper proposed reasonable measures that the lessee enterprises in financing leasing industry in our country should consider from the perspectives of both the industry and enterprises.From lease industry's perspective,the lessee needs to make their voices heard in the Ministry of Finance as well as regulatory agencies,the judiciary,the tax authorities,invoking the development of the implementation program in adjusting accounting standards,which better fits current situation of China leasing industry.From the corporate's perspective,the lessee is required to assess lease contracts systematically.Meanwhile,they also need to arrange the adjustments on the lease period and rent structure on the premise of controllable risks,to avoid the excessive impact when the revised accounting standards become effective.