GAAP vs IFRS Treatment of Leases and the Impact on Financial Ratios

Review of Business & Finance Studies, v. 4 (2) p. 97-106

10 Pages Posted: 5 Sep 2013

See all articles by Peter Harris

Peter Harris

New York Institute of Technology

William Stahlin

Stevens Institute of Technology - School of Business

Liz Washington Arnold

The Citadel

Katherine Kinkela

New York Institute of Technology

Multiple version iconThere are 2 versions of this paper

Date Written: 2013

Abstract

As of January 1, 2011, most of the world financial market economies are using International Reporting Standards (IFRS) as the required framework for financial statements. A non-comprehensive listing includes the European Union Countries, Canada, Australia and New Zealand. In the United States, US Generally Accepted Accounting Principles (GAAP) is still required but adoption of IFRS has support of many accounting firms and professional organizations and is under consideration by the SEC. This case study focuses on differences in the treatment of leases and the impact of these differences on financial statements and selected financial ratios. Students take GAAP financial statements and prepare an IFRS based balance sheet and income statement. It is necessary to understand both GAAP and IFRS rules regarding leases to address this case study. This case study is suitable for use at both the undergraduate and graduate levels. It may be used in an Intermediate Accounting II, Accounting Theory, Financial Statement Analysis or an International Accounting class, as well as an Investment Finance course. The case can be offered as an individual case study or as a group project.

Keywords: US GAAP, IFRS, Capital Lease, Operating Lease, Financing Lease, Ratios

JEL Classification: M4, M41, M42, M48, M49

Suggested Citation

Harris, Peter and Stahlin, William and Arnold, Liz Washington and Kinkela, Katherine, GAAP vs IFRS Treatment of Leases and the Impact on Financial Ratios (2013). Review of Business & Finance Studies, v. 4 (2) p. 97-106. Available at SSRN: https://ssrn.com/abstract=2280803

Peter Harris (Contact Author)

New York Institute of Technology ( email )

Kingdom of Bahrain
New York, NY 10023
United States

William Stahlin

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Liz Washington Arnold

The Citadel ( email )

171 Moultrie St.
Charleston, SC 29409
United States

Katherine Kinkela

New York Institute of Technology ( email )

Kingdom of Bahrain
New York, NY 10023
United States

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