What the future looks like

An interview with Dan Levy, Head of Financing Solutions for BT Global Services.


Rachael Woods

Rachael Woods

Rachael Woods is Marketing and Communications Director at CIT and is responsible for defining and executing all marketing, communication and sales force effectiveness activity for CIT across Europe.
Rachael Woods

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Introduction from Executive Producer RACHAEL WOODS

We interviewed Dan Levy, Head of Financing Solutions for BT Global Services, on what the upcoming lease accountancy changes could mean to the industry.

Who should be interested in this? Anyone interested in the upcoming lease accountancy changes.

 

Rachael Woods: The perception of leasing, especially in the UK, has sometimes been an obstacle for companies to overcome. It is also hindered by the interpretive nature of leases under the International Accountancy Standards Board’s (IASB) lease accountancy rules. What are your views on educating the customer in markets such as the UK about leasing, how it differs from their perception of rentals as a payment mechanism and how the lease is accounted for?

Dan Levy: “Historically, the perception of leasing has been quite negative in the UK as it would often be perceived as something that the customer can’t afford to pay cash for. This would then bring in issues of how the lease is treated, often needing to be off balance sheet. The crux of the issue is that lease accounting is superficially straightforward, but in practice is more complex than anything else as it is open to interpretation. Our customers really like usage based models as they pay for what they use. Whilst this may seem similar to a standard operating lease, it differs in that this is a genuine service, where the physical asset is owned by a third party and where the payment is for the service and not the asset. Most customers don’t see it as leasing, especially as it is entirely dependent on what they use.  But the reality is that there probably is a lease embedded in there if you choose to look for it.   One of the really big things about the new accounting standard is likely to be that what is and what isn’t an embedded lease may well change significantly.

Rachael Woods: Traditionally leases would fall under the operating or finance lease categories, separated by term and lease accounting treatment. However, in technology markets where service can be more integral to the deal than the asset, lease accounting challenges whether a lease can be attributed against a “true” utility model.

Dan Levy: “The key obstacle to implementing the changes to accountancy rules is the complexity of the treatment of a lease as an understanding is required for what goes on balance sheet. For example if an aeroplane is leased for 5 years, does the whole value of the asset go on the balance sheet or only the bit you pay for over 5 years? The new standard looks like a lot will revolve around whether assets can be substituted”

Rachael Woods: The debate as to what can be off balance sheet is complex and open to interpretation. Companies have gone into liquidation in the past as a consequence of not accounting for their leases on their balance sheet, making the industry naturally cautious not to take a blanket approach.

Dan Levy: “As a member of the leasing industry for a number of years, I think the changes could be very exciting if they bring clarity to leasing accounting and allow us to look at products and services differently, this will ultimately benefit both us and our customers. However, in my role as someone who ensures governance of leases and financing I have a concern that there could be loopholes created which, if mistreated, could be damaging.”

Rachael Woods: The Leasing Foundation has a key role to play in supporting the leasing industry through this period of uncertainty. This can be further supported through the introduction of talented, future leaders that will bring in new blood into the industry and constructively challenge some of the better established areas of thought that will ensure that the industry moves with technological and social change.

Dan Levy: “The majority of people, including myself, have fallen into the industry rather than set out with the objective of joining it. There still exists a culture that doesn’t perceive the asset finance industry as exciting to younger minds, and there is definitely a need for business savvy, intelligent and intuitive new starters to challenge long standing conventions.”

 Dan Levy initially joined Parc during the boom of the IT leasing industry during the late 1980s and was responsible for supporting various branded leasing programmes and then managing, among others, the BT program. After a brief departure from the IT leasing world, he returned to set up a large ticket operation for a broker before finally moving to BT where he has been for over 10 years. Dan currently heads up the Financing Solutions business at BT Global Services, the corporate & international sector of BT’s commercial business. Specialising in cross border and multi-site deals for large corporate customers, Dan and the team are not shy to complex deals, needing to understand the customer’s intricate requirements, and how the lease will be accounted for on the company book. Dan.Levy@BT.com

 

The opinions, statements and information that appear in this article are those of the author and do not necessarily reflect the views or outlook of CIT Group Inc. or its affiliates.

CC BY-SA 4.0 What the future looks like by Rachael Woods is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.