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“Fly down”: the impact of new accounting standards on the airline industry risk assessment

Author

Listed:
  • Niccolò Comerio

    (LIUC - Università Carlo Cattaneo)

  • Fausto Pacicco

    (LIUC - Università Carlo Cattaneo)

  • Massimiliano Serati

    (LIUC - Università Carlo Cattaneo)

Abstract

Lease accounting has often been criticized for being too reliant on bright lines and subjective judgments, as lessees were not required to disclose assets and liabilities arising from operating leases directly on the balance sheet, thereby improving the appearance of the financial condition to investors. To remedy this, in January and February 2016 the IASB and the FASB issued the new accounting standard IFRS 16 and ASC 842, starting a new era of lease accounting and ending the guesswork previously required when calculating companies’ lease obligations. This paper investigates the impact on investors’ risk perception level of EU and US airline companies, following the enactment of these accounting standards. Results confirm the importance of disclosing all the relevant information about leases directly within the financial statements and not in footnotes, as this increases transparency and comparability between financial statements, protecting all investors, ranging from the rational ones to the more credulous.

Suggested Citation

  • Niccolò Comerio & Fausto Pacicco & Massimiliano Serati, 2024. "“Fly down”: the impact of new accounting standards on the airline industry risk assessment," Empirical Economics, Springer, vol. 67(5), pages 2109-2133, November.
    • Handle: RePEc:spr:empeco:v:67:y:2024:i:5:d:10.1007_s00181-024-02608-w
    DOI: 10.1007/s00181-024-02608-w
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    More about this item

    Keywords

    Lease accounting; IFRS 16; ASC 842; Airline industry; Risk perception; State-space model;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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