Accounting Operating Lease- A Constructive Capitalisation Strategy

ISSN: 2231-4687

11 Pages Posted: 20 Jun 2019

See all articles by P Natarajan

P Natarajan

Pondicherry University

Mohamed Ali Kuniparambil

Pondicherry University - Department of Commerce

Date Written: May 1, 2019

Abstract

This paper intends to evaluate the effect of constructive capitalization of operating leases. The operating leases have to be treated appropriately so that the investors who use the financial ratios are enlightened adequately. The comparative model is used to look into the extent of the changes in the financial ratios of selected companies once the operating lease is capitalized. T-test and Wilcoxon test are applied on the basis of the normality of data. Similar studies have been conducted in many developed economies like USA, UK, New Zealand, etc. From the study, it was found that some financial ratios have significant changes, a finding that goes in tune with the hypothesis of the study. Being an emerging economy, in India, the area has not been discussed much. Moreover, the capitalization of operating lease is to be implemented by 1st April 1019 in Ind AS as a part of the latest convergence policy.

Keywords: operating lease, financial ratio, constructive capitalisation, off-balance sheet items

Suggested Citation

Natarajan, P and Kuniparambil, Mohamed Ali, Accounting Operating Lease- A Constructive Capitalisation Strategy (May 1, 2019). ISSN: 2231-4687, Available at SSRN: https://ssrn.com/abstract=3403422 or http://dx.doi.org/10.2139/ssrn.3403422

P Natarajan (Contact Author)

Pondicherry University ( email )

Mahe Centre, Cemetery Road
Pondicherry
Pondicherry, PA Puducherry UT 605 014
India

Mohamed Ali Kuniparambil

Pondicherry University - Department of Commerce ( email )

Department of Commerce
Kanchi Mamunivar Centre for Post Graduate Studies
Pondicherry University, Tamil Nadu 605014
India

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