Is Capitalization of Operating Lease Way to Increase of Comparability of Financial Statements Prepared in Accordance with IFRS and US GAAP?

Abstract

The paper is concerned with an evaluation of possibilities of companies using operating lease and prepared fi nancial statements under IFRS or US GAAP comparison. The data of non-fi nancial companies listed on the Prague Stock Exchange and reporting information on operating lease in accordance with IAS 17 are used. The study presents the impact of operating lease capitalization on companies' fi nancial statements and fi nancial analysis ratios. The results show a negative impact of operating lease capitalization on fi nancial analysis ratios. The study was motivated by a common eff ort of the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to develop the common standard for Lease reporting. In 2013, a joint exposure dra of standard (ED2013/6) Leases was published. Under the new standard, it is required to capitalize all lease agreements over one year. The distinction between operating leases and fi nance leases should not exist anymore. The study was carried out to demonstrate the potential impact resulting from the proposed adoption of the new accounting standard concerning mandatory capitalization of all lease contracts.

Impactos da adoção do IFRS 16 em uma empresa brasileira arrendatária

“…Os achados desta pesquisa corroboram e complementam as evidências de estudos anteriores, em especial os estudos de Barros et al (2011), Branswijck e Longueville (2011), Batista e Formigoni (2013), Colares et al (2018), Bohušová (2015), You (2017), Oztürk e Serçemeli (2016) e Magli, Nobolo e Ogçiari (2018).…”

Impact of New Standard "IFRS 16 Leases" on Statement of Financial Position and Key Ratios: A Case Study on an Airline Company in Turkey

“…The ratio of the unrecorded assets to the unrecorded liabilities has been calculated as 85% upon the assumption that the lease period is 10 years, the interest rate is 6% and 40% of the life cycles of the assets have been consumed, the ratio of the unrecorded assets to the unrecorded liabilities has been calculated as 79% upon the assumption that the lease period is 12 years, the interest rate is 6% and 50% of the life cycles of the assets have been consumed and as a result, the average of these two ratios has been taken and according to the results of the study in which the ratio of the unrecorded assets to the unrecorded liabilities has been accepted as 82%, it has been expressed that the capitalization of the operating leases shall cause to serious changes both on the return on asset and the liability/equity ratios. Bohušová (2015) has focused on the results of showing the operating leases on the financial statements after capitalization following the changes to be made on IAS17. As a result, he has expressed that the related changes shall have important effects on the financial statements and financial ratios.…”

Aircraft Wet Leases: Accounting Dissonance with Competitive Strategy and Travelers’ Perspectives

“…Accounting research on leases has been divided into five lines (Morales-Diaz et al 2018): economic consequences of accounting standards, determinant of leases, value relevance, leases' valuation, and the impact of leases on accounting ratios. Lots of scientific articles have instead focused on the effects of IFRS 16 on financial statements and ratios and the impacts of the capitalization of the unrecorded leases, among the most recent (Gross et al 2014); (Bohušováa 2015); (Ericson and Skarphagen 2015); (Nunung 2015); (Wong and Joshi 2015};(Hsieh et al 2015); (Öztürk 2016); (Sarı et al 2016); (Sacarin 2017); (Arnold and Tahtah 2017); (Moralez-Diaz 2018). Among other aspects, some articles have dealt with the effect on credit risk, among the most recent (Altamuro et al 2014); (Masaki 2017); (Lim 2017); lease term (Bohušováa et al 2014); and macroeconomics or industry competitiveness aspects of lease (Andrikopoulos et al, 2014); (Vakhitov Damir et al 2014).…”