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Extant REIT research largely overlooks operating leases as an alternative source of financing. In this study, we hand-collect lease information of 334 unique REITs over the period of 1993 to 2018, and we document that an increasing number of REITs have been including operating leases in their capital structure to finance income-generating investment properties. We examine the determinants of the operating lease decision and find that REITs which adopt operating leases tend to be larger and have more growth opportunities as measured by Tobin’s Q. But they also have higher leverage, report lower funds from operations, and higher risk. We further find that operating lease intensity for REITs is negatively affected by credit ratings, but not by growth opportunities. Lastly, we examine the market effect related to operating lease decision and find that REITs with operating leases are associated with lower shareholder returns. Overall, our findings imply that operating leases are employed as an alternative financing source by REITs that are highly levered and cannot rely much on their internal funding. As a result, the market does not view the use of operating leases in the REIT sector favorably.

PurposeThis study aims to examine the economic consequences of, and managerial behaviour in response to, the introduction of IFRS 16 Leases. It extends the debt covenant hypothesis to explain why firms reduce the use of operating leases with the introduction.Design/methodology/approachThis study develops a model, based on operating leases as an alternative financing source and the determinants of debt policy, to estimate the effects of gearing on operating lease intensity. High gearing is a proxy to probably closer to the violation of, or expected to violate, the gearing restriction in debt covenants given the retrospective capitalisation of operating leases, when IFRS 16 takes effect.FindingsThis study finds that operating lease intensity fell between 2011 (immediately after the first exposure draft leading to IFRS 16) and 2018 (immediately prior to the effective date of IFRS 16). It also finds that gearing affects changes in operating lease intensity over 2011 and 2018, consistent with the debt covenant hypothesis.Research limitations/implicationsThe introduction of IFRS 16 is a natural experiment with unique characteristics (the active lobbying behaviour, ex ante evidence on adverse economic consequences, a prolonged standard-setting period, etc.) valuable for accounting research.Practical implicationsA showcase about the relevance of financial reporting for contracting interests of firms and managers and a good reference for accounting standard setters in considering and managing the economic consequences of proposed accounting standards.Originality/valueThis study adds to the limited research on the consequences of accounting standards and documents the ex-post impact on firm leverage ratios and the behavioural aspects of reporting entities.

Effect of application of IFRS 16 could differ across industries. Retail and wholesale companies are expected to be most significantly affected by the changes in the new lease requirements. Retail space rental is a fundamental part of the business model of these entities. The ratio of operating and finance leases for selected companies in the retail sector is 96% in average. An important factor influencing the magnitude of the changes is not only the percentage of the operating lease to the total lease, but also the volume of unrecognized assets and leasing liabilities. The main aim of the paper is to evaluate the impact of the new lease reporting in the lease intensive industries, especially to keep comparability of financial indicators. Financial statements data of EU retail and wholesale companies are subject of the research. Leases and financial statements and transformed financial statements using IFRS 16 for operating lease reporting are the subject of comparison. The information concerning the operating lease presented in the notes is utilized for financial statements transformation. The financial statements items were selected as significant indicators: Long-term assets, B/S total, Equity, Liability, EBIT, EBITDA, Depreciation, Interest Cost. The changes in affected financial statements' items and financial analysis ratios were researched. The average increase in total assets is 37% and debts 55%. The decrease in equity of 4.5% is due to the fact that the carrying amount of the leased asset usually decreases faster than the carrying amount of the lease liability.

Purpose: This research aims to examine impact of high lease numbers based on PSAK 73 and PSAK 30 on firm value.   Theoretical framework: The PSAK 73 (IFRS 16 adoption) mandates the reclassification of operating leases as finance leases, leading to an increase in both assets and liabilities of the company. This change, coupled with the challenging economic conditions caused by the Covid-19 pandemic, can lead into a potential decrease in firm's value.   Design/methodology/approach: The study uses purposive sampling of firms unaffected during the pandemic, such as food and beverage, agriculture, telecommunications, chemical, and pharmaceutical subsectors listed on Indonesia Stock Exchange (IDX) from 2017 to 2021 and multiple regression is used to test the hypothesis   Findings: The research findings suggest a positive relationship between the increase in lease amounts under PSAK 73 and firm value during the pandemic in Indonesia. Additionally, the study reveals a negative relationship between lease amounts under the old standard and firm value prior to the pandemic.   Research, Practical, & Social Implications: The implementation of PSAK 73 in 2020 is appropriate, it has a positive effect on firm value   Originality/value: The study’s originality is the impact of PSAK 73 on firm value in abnormal economic conditions that have not been done in previous research.

Em 2017 o CPC editou a norma CPC 06 (R2), alinhada ao IFRS 16, com a finalidade de disciplinar a contabilização da operação do arrendamento mercantil e minimizar os efeitos provocados pela assimetria de informação contábil para os investidores. Portanto, o objetivo desse estudo é verificar se a aprovação do CPC 06 (R2) causou alguma alteração no valor das ações das empresas listadas na Bovespa. Trata-se de um estudo quantitativo, documental. Usou-se a técnica de estudo de eventos para analisar os retornos anormais dos ativos antes do evento e após o evento. A coleta de dados deu-se por meio do banco de dados Economatica. Os resultados mostraram que a publicação do CPC 06 (R2) não alterou o preço da ação das empresas com leasing operacional listadas na Bovespa.

Rental transactions play a very prominent role in property relations of many Russian enterprises and vary widely. Along with traditional rental services, their new forms also continue to develop in recent years, which is first of all leasing. However, in a challenging economic environment that objectively led to the decline of leasing transactions, there are a number of factors that contribute to the preservation of the interest of the business community. The article examines the modern approaches to accounting practice of leasing operations based on the current institutional framework. Due to the increasing interest in international leasing deals, the methodological approaches to recording the main operations of the lessee under the lease contract in accounting are offered, based on the requirements of international standards. Given the increased interest of external users to accounting due to the benefits provided by the practical application of International standards, as well as the need to increase the investment attractiveness of Russian companies, these provisions cause doubtless interest of all market participants to IFRS and determine the relevance of the proposed article.

This paper studies the financing role of leasing and secured lending. We argue that the benefit of leasing is that repossession of a leased asset is easier than foreclosure on the collateral of a secured loan, which implies that leasing has higher debt capacity than secured lending. However, leasing involves agency costs due to the separation of ownership and control. More financially constrained firms value the additional debt capacity more and hence lease more of their capital than less constrained firms. We provide empirical evidence consistent with this prediction. Our theory is consistent with the explanation of leasing by practitioners, namely that leasing \"preserves capital,\" which the academic literature considers a fallacy.

This study sheds light on the extent to which the use of operating leases depends on reporting incentives, such as understating liabilities, and non-reporting incentives that partly arise from the overlap between accounting, bankruptcy, and tax laws, such as increasing financing capacity and flexibility. We provide evidence that expanding financing capacity, accommodating volatile operations, and maximizing the present value of tax deductions are all important drivers of leasing decisions. Our findings suggest that capital markets and contracting-based reporting incentives have little influence on operating lease use. In particular, we find weak evidence that firms increase operating leases in advance of issuing equity, and no evidence that firms use operating leases to window-dress in advance of issuing debt, to avoid debt covenant violations, for compensation purposes, or to paint a better picture on an ongoing basis. These findings are consistent with reporting incentives playing a second-order role in leasing decisions.

We provide evidence that disclosed items are not processed differently from recognized items when the disclosures are salient, not based on management estimates, and amenable to simple techniques for imputing as-if recognized amounts. For a sample of firms with both capital and operating leases, we find that as-if recognized amounts for leases are generally reliable and that both recognized lease obligations and disclosed lease obligations are associated with proxies for costs of debt and equity. The magnitudes of these associations are not statistically different across accounting treatments, suggesting that market participants impound as-if recognized operating lease obligations and recognized capital lease obligations similarly into costs of capital. Conditioning on the reliability of as-if recognized operating lease obligations, we find a difference in the association between recognized versus as-if recognized lease obligations and proxies for the costs of debt and equity when the operating lease disclosures are less reliable.

From the perspective of interest conflicts, this study investigates the relationship between corporate leverage manipulation and financial risk using a sample of A-share listed real estate firms in China from 2009 to 2023. Employing a two-way fixed effects model, the main findings are as follows: (1) Leverage manipulation significantly increases the level of financial risk among real estate firms; (2) Mechanism analysis reveals a collusion effect between controlling shareholders and management, as well as between external auditors and management, both of which significantly amplify the impact of leverage manipulation on financial risk. These findings support the collusion effect hypothesis and reject the monitoring effect hypothesis; (3) Heterogeneity tests show that the impact of leverage manipulation on financial risk is more pronounced in non-state-owned enterprises, in firms dominated by transactional institutional investors, and in regions with lower reliance on land finance. This study uncovers the intrinsic link between leverage manipulation and financial risk in the real estate sector and provides important policy implications for regulators aiming to improve and standardize financial risk management in the industry.