Economic Consequence of Accounting Standards In The Hotel Industry: Lobbying Arguments Versus Expected Impact

European Accounting and Management Review, Issue 3

26 Pages Posted: 25 Feb 2016

Date Written: 2015

Abstract

Accounting standards generate economic consequences that can be either intended or unintended. European and US accounting regulators have proposed to capitalize operating leases so that future payments derived from lease contracts are accounted for as debt. As operating leases are an important source of funding for the hotel industry, the sector has lobbied against the proposal. This paper analyses the economic impact on the hotel business of operating lease capitalization, using both hotel operators’ perceptions and quantitative analyses of the expected consequences. Results show that the arguments presented in the hotels’ comment letters are confirmed by the impact predicted. While hotels do not believe that the new standard will improve financial information quality (the intended economic consequence), they expect an increase in debt and reduced profitability (the unintended economic consequences), which may affect their strategies. An early response to this new standard is proposed in order to avoid unintended effects.

Keywords: operating leases, hotels, economic consequences, business strategy, lobby

Suggested Citation

Arimany, Nuria and Fito, M Angels and Orgaz, Neus, Economic Consequence of Accounting Standards In The Hotel Industry: Lobbying Arguments Versus Expected Impact (2015). European Accounting and Management Review, Issue 3, Available at SSRN: https://ssrn.com/abstract=2737293

Nuria Arimany

University of Vic ( email )

Carrer de la Sagrada Família, 7
Vic
Barcelona, 08500
Spain

Neus Orgaz

Independent ( email )

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