Impact of Lease Capitalization on Financial Ratios of Listed German Companies

29 Pages Posted: 25 Jul 2006

See all articles by Rolf Uwe Fuelbier

Rolf Uwe Fuelbier

University of Bayreuth

Jorge Lirio Silva

University of Southampton - School of Social Sciences

Marc Henrik Pferdehirt

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: July 19, 2006

Abstract

The separation of leases into operating and finance leases for accounting purposes can result in incentives to favour operating lease contracts since they avoid on-balance sheet debt. The IASB is conducting an active research project on leasing, following the G4+1 group's research on possible improvements to lease accounting. One discussed alternative suggests treating all leases similar to today's finance leasing. Previous studies have simulated this accounting treatment following the Imhoff/Lipe/Wright (1991, 1997) constructive capitalization method. Our study is - to our knowledge - the first simulation for Germany based on a modified constructive capitalization method and, additionally, a factor model used by Standard & Poor's (CreditStats®). In line with prior literature, our results show notable changes in a variety of financial ratios. Clustering the sample into different industries, we detect significant differences between industry groups. However, the relative ratio-based ranking of the sample companies does not change much. Additionally, we observe that the CreditStats® - model yields fairly comparable results.

Keywords: leases, constructive capitalization, off-balance sheet, Tweedie approach

JEL Classification: M41, M43, M44, M47, G12, G29

Suggested Citation

Fuelbier, Rolf Uwe and Lirio Silva, Jorge and Pferdehirt, Marc Henrik, Impact of Lease Capitalization on Financial Ratios of Listed German Companies (July 19, 2006). Available at SSRN: https://ssrn.com/abstract=918223 or http://dx.doi.org/10.2139/ssrn.918223

Rolf Uwe Fuelbier (Contact Author)

University of Bayreuth ( email )

Universitätsstraße 30
Bayreuth, 95447
Germany
+49(0)921 554820 (Phone)
+49(0)921 554822 (Fax)

HOME PAGE: http://www.irl.uni-bayreuth.de

Jorge Lirio Silva

University of Southampton - School of Social Sciences ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Marc Henrik Pferdehirt

affiliation not provided to SSRN

Register to save articles to
your library

Register

Paper statistics

Downloads
2,116
Abstract Views
9,219
rank
3,098
PlumX Metrics