IASB Changes on Leasing - A Study Discovering the Impact of Lease Disclosures in the Assessment of Equity Risk

Int. J. Accounting, Auditing and Performance Evaluation, Vol. 9, No. 1, 2013

Posted: 22 Jun 2013

See all articles by Anastasia Kraft

Anastasia Kraft

University of Oldenburg - Accounting and Corporate Governance

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Date Written: June 21, 2012

Abstract

We investigate the relationship between equity risk and operating risk as well as equity risk and financial risk by analysing different levels of leverage, reported debt and earnings volatility of German listed companies. The results suggest that the measurement of equity risk is based on the variability in ROA. For firms that already have higher operating risk, investors include operating leases in the measurement of equity risk in addition to operating risk and reported financial risk. For firms with lower variability in ROA, the assessment of equity risk relates only to reported financial risk and operating risk; in addition, off-balance sheet debt is not significant in explaining variations in stock returns. Since reported debt and off-balance sheet debt are not treated equally, a mandated recognition of all lease contracts is expected to enhance the assessment of equity risk for firms with lower variability in earnings.

Keywords: leases, lease accounting, operating leases, off-balance sheet financing, recognition versus disclosure, equity risk, operating risk, business risk, financial risk, the efficient market hypothesis

Suggested Citation

Kraft, Anastasia and Lopatta, Kerstin, IASB Changes on Leasing - A Study Discovering the Impact of Lease Disclosures in the Assessment of Equity Risk (June 21, 2012). Int. J. Accounting, Auditing and Performance Evaluation, Vol. 9, No. 1, 2013, Available at SSRN: https://ssrn.com/abstract=2282898

Anastasia Kraft (Contact Author)

University of Oldenburg - Accounting and Corporate Governance ( email )

Ammerländer Heerstraße 114-118
Oldenburg, D-26111
Germany

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences ( email )

Von-Melle-Park 9
Hamburg, 20146
Germany

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