Title: Changes in lease financing practice during lease accounting standard overhaul (2005-2014)

Authors: Xiaofei Song

Addresses: Department of Accounting, Sobey School of Business, Saint Mary's University, 923 Robie Street, Halifax, Nova Scotia B3H 3C3, Canada

Abstract: This study examines empirically the changes in lease financing practice since the International Accounting Standard Board (IASB) and the Financial Accounting Standard Board (FASB) launched their joint project to overhaul lease accounting standards. Under the proposed new lease standards, all existing and new lease contracts longer than 12 months, including the currently off-balance sheet operating leases, are required to be capitalised. Using a sample of retail sector firms from exchanges of seven different countries, I find an increase in contingent lease payments, which is consistent with the notion that companies will seek new off-balance sheet financing loopholes once existing ones are likely to be taken away. This study provides pertinent information to facilitate ongoing deliberation concerning lease accounting and assessment of the new lease accounting standards.

Keywords: lease financing; off-balance sheet financing; contingent lease payments; lease renewal option; lease accounting standards; retail industry; retailing.

DOI: 10.1504/AJFA.2016.080735

American Journal of Finance and Accounting, 2016 Vol.4 No.3/4, pp.309 - 326

Received: 03 Sep 2016
Accepted: 26 Oct 2016
Published online: 05 Dec 2016 *

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