Operating and synthetic leases: Exploiting financial benefits in the post-Enron era

Duke, Joanne C.; Hsieh, Su‐Jane; Su, Yu‐Li

doi:10.1016/j.adiac.2009.03.001

Cited by 63 publications

(75 citation statements)

References 12 publications

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“…This method is widely accepted and used in prior studies that examined the effect of lease __________________________________________________________________________________ 141 capitalization on financial statements and financial ratios such as Beattie et al (1998), Bennet and Bradbury (2003), Duke et al (2009), Singh (2010), Branswijck et al (2011 and Wong and Joshi (2015). For the purpose of lease capitalization there is another method called heuristic method, but applying of heuristic method causes significantly higher unrecorded lease asset and liability amounts than constructive capitalization method.…”

Section: Lease Capitalization Methodsmentioning

confidence: 99%

The effect of the IFRS 16: constructive capitalization of operating leases in the Turkish retailing sector

Sari¹,

Altıntaş²

2016

Pressacademia

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The new International Financial Reporting Standard (IFRS) 16 issued by the International Accounting Standards Board will significantly change accounting for leases. The most important issue is that operating leases beyond one year will be capitalized, which means Off-TheBalance Sheet (OBS) financing via operating lease is effectively eliminated. "IFRS 16: Leases" will fundamentally change the way that leases are accounted for and reported in financial statements. This paper tries to illustrate the impact of IFRS 16 on financial statements and financial ratios. The study is an ex ante research, simulating a predicted outcome of the new lease standard, which will be in effect after 1 January 2019. For this purpose, this research is applied to the Turkish retailing companies whose shares are publicly traded in the Istanbul Stock Exchange. The study uses the constructive capitalization method for these companies. The results indicate that new standard will have a statistically significant effect on some of the financial ratios tested (debt/asset, debt/equity, return on assets (ROA) and return on equity (ROE)) for 2010 -2013.

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Section: Lease Capitalization Methodsmentioning

confidence: 99%

The effect of the IFRS 16: constructive capitalization of operating leases in the Turkish retailing sector

Sari¹,

Altıntaş²

2016

Pressacademia

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“…Thus, soon after these standards were issued, studies highlighted that the different accounting treatments made firms structure their leases to avoid them appearing on the balance sheet (Imhoff and Thomas ), and the trend has been growing over time (Duke et al. ; Beatty et al. ; Bryan et al.…”

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confidence: 99%

The Value Relevance of Operating Lease Liabilities: Economic Effects of IFRS 16

Inchausti

Pardo

2018

Australian Accounting Review

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The new IASB and FASB models for leases aim to improve the quality of financial reporting. To this end, both standard setters impose the recognition of assets and liabilities for operating leases. Meanwhile, preparers have been strongly lobbying against these changes, as in their view the new treatment will lead to negative economic consequences. We undertake a value-relevance study to examine whether as-if capitalised operating leases are priced by market users in a relatively unexplored setting. We consider Spanish listed firms, and employ handcollected data on operating leases disclosed in the notes to the financial statements to constructively capitalise the assets and liabilities. Our analysis suggests that investors in code-law countries with less developed markets and low enforcement quality do not behave any differently to those in common-law countries that have more developed markets and stricter enforcement policies. Investors equally value recognised debts and operating lease liabilities resulting from information in the notes in retail sectors. In our view, these results could provide some comfort to managers in the most affected industries, as they suggest the change will not have a major impact on the stock exchange.

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“…The S&P 500 in 2003 show how companies can "hide" billions of dollars of liabilities and enhance earnings, income, and ratios, by reporting leases as operating. However, the capitalisation proposal should be fully considered (Duke, Hsieh, & Su, 2009).…”

Section: Literature Reviewmentioning

confidence: 99%

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2020

CBR

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Leasing is confirmed among the preferred forms of financing by SMEs (Small and Medium Enterprises), even if its use grows both among large companies and private individuals. The stipulated in Europe increased in 2017 by 8.3% over the previous year. From 1 January 2019 the new accounting standard IFRS 16 is in force, which concerns the accounting of leasing contracts. The new methods of accounting for leasing contracts in the financial statements drawn up based on international accounting standards come into force. In fact, as from 1 January 2019, the IAS adopters are required to apply the new IFRS 16 standard, introduced in place of IAS 17, with the aim of standardizing the methods for recognizing leasing contracts in the financial statements. Scientifically, the most important researches concerning leasing have dealt with the topic focusing on accounting harmonization, accounting for leasing, capitalization of leasing and tax. Through the theoretical analysis and the simulation of our case study we want to answer a question: How the change in the accounting of leases is reflected in the financial statements?

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Operating and synthetic leases: Exploiting financial benefits in the post-Enron era

Cited by 63 publications

References 12 publications

The effect of the IFRS 16: constructive capitalization of operating leases in the Turkish retailing sector

The effect of the IFRS 16: constructive capitalization of operating leases in the Turkish retailing sector

The Value Relevance of Operating Lease Liabilities: Economic Effects of IFRS 16

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