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Comparing the effects of IASB Proposal on leasing: an impact assessment of EU listed Companies

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  • Tommaso Fabi
  • Enrico Laghi
  • Marco Mattei
  • Alessandro Sura

Abstract

In August 2010, the IASB and the FASB jointly released an exposure draft proposing a "right-of-use" model for the recognition of lease-related assets and liabilities. The literature shows that leasing is a relevant subject for study. Many studies have investigated the point of view of users and preparers about lease accounting. Moreover, significant studies on the impact assessment of new accounting models for leases have been conducted. The objective of this paper is to perform an impact assessment of the new standard on leases that takes into account companies listed on the main EU stock exchanges. Specifically, this paper try to estimate the magnitude of the change in some ratios that would have been produced by the new treatment with reference to 2011. The results of the paper show that the debt-to-equity ratio increased significantly and, subject to the IASB final decisions on profit or loss accounting, the EBITDA should also have increased, while ROA should not significantly be affected. Furthermore, the results show that the impact of the introduction of the IASB proposal on financial ratios will differ both among industries and among European Union countries.

Suggested Citation

  • Tommaso Fabi & Enrico Laghi & Marco Mattei & Alessandro Sura, 2014. "Comparing the effects of IASB Proposal on leasing: an impact assessment of EU listed Companies," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2014(2-3-4), pages 17-57.
    • Handle: RePEc:fan:frfrfr:v:html10.3280/fr2014-002002
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    References listed on IDEAS

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    1. Vivien Beattie & Alan Goodacre & Sarah Thomson, 2000. "Recognition versus Disclosure: An Investigation of the Impact on Equity Risk Using UK Operating Lease Disclosures," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(9‐10), pages 1185-1224, November.
    2. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    3. Beattie, Vivien & Goodacre, Alan & Thomson, Sarah Jane, 2006. "International lease-accounting reform and economic consequences: The views of U.K. users and preparers," The International Journal of Accounting, Elsevier, vol. 41(1), pages 75-103.
    4. Rolf Uwe Fülbier & Jorge Lirio Silva & Marc Henrik Pferdehirt, 2008. "Impact of Lease Capitalization on Financial Ratios of Listed German Companies," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 60(2), pages 122-144, April.
    5. Sharpe, Steven A. & Nguyen, Hien H., 1995. "Capital market imperfections and the incentive to lease," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 271-294.
    6. Vivien Beattie & Alan Goodacre & Sarah Thomson, 2000. "Recognition versus Disclosure: An Investigation of the Impact on Equity Risk Using UK Operating Lease Disclosures," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(9&10), pages 1185-1224.
    7. Elisabetta Barone & Jacqueline Birt & Soledad Moya, 2014. "Lease Accounting: A Review of Recent Literature," Accounting in Europe, Taylor & Francis Journals, vol. 11(1), pages 35-54, June.
    8. Sylvain Durocher, 2008. "Canadian Evidence on the Constructive Capitalization of Operating Leases," Accounting Perspectives, John Wiley & Sons, vol. 7(3), pages 227-256, August.
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