The Financial Times draws our attention to a recent change in international accounting standards which will require corporations to book operating leases as liabilities – debt, in effect. Stated simply, the bean counters don’t like the fact that leases can be notched up as operating expenses when the debt on the purchase of the same installations would not. Eliminating the need to make some comment on the effect that this might have on the Spanish banks (Santander, BBVA – most of them, really) that have funded their way through the crisis by selling and leasing back their entire branch networks is the apparent fact that ratings agencies and informed investors already count these kinds of arrangements as such. Although the reader might imagine the stench that would have been raised were this to have taken place last May, quite possibly there is no news there. But it does make us wonder when certain national accounting conceits might also find themselves up for a similar, if opposite, revision. For example...Why, in a sentence, does the purchase of a holiday residence by a foreigner (with no intention of becoming resident) get booked as a direct foreign investment lump sum to the capital account rather than finding itself amortized over some period in the current? After all, assuming that the buyer would be a repeat visitor regardless, nothing is taking place here that does not come under the heading of ‘roof over one’s head’ – this, of course, with the added feature that the service export section of the current account irrevocably loses a summer renter of residence in perpetuity.
Calculating the effect is likely to end up being a fairly onerous task and the end result possibly small. But if one believes that what threatens Spain’s solvency the most is its current account deficit - and can accept that the evil twin of the concept of diminishing marginal returns is described by the adage, ‘the straw that broke the camel’s back’...
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