The path of lease resistance

How changes to lease accounting treatment may impact your business

Andrew D. Gross, G. Ryan Huston, Janet M. Huston

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

In this installment of Accounting Matters, we examine potential consequences of the Financial Accounting Standards Board's Proposed Accounting Standards Updates for Leases. In the context of a previous accounting change (FIN 48), we investigate how these changes will affect firms' accounting choices, investment decisions, debt covenant requirements, and analysis of other key financial data. Changes in accounting standards may have significant indirect economic effect on companies as they can trigger debt covenant violations, restrict access to capital, and distort key financial information used by investors and lenders. New accounting standards may also directly affect the calculation of employee bonuses and incentives that utilize EBITDA or operating income as benchmarks. We include recommendations for managers and identify specific debt covenant components that may limit the negative consequences of the proposed change to lease accounting.

Original languageEnglish (US)
Pages (from-to)759-765
Number of pages7
JournalBusiness Horizons
Volume57
Issue number6
DOIs
StatePublished - 2014

Fingerprint

Debt covenants
Lease
Accounting standards
Employees
Benchmark
Violations
Trigger
Economic effect
Financial information
Managers
Incentives
Financial accounting standards
Bonuses
Investment decision
Income
Financial data
Accounting choice
Accounting change
Investors

Keywords

  • Accounting standards updates-leases
  • FASB
  • Lease accounting

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

Cite this

The path of lease resistance : How changes to lease accounting treatment may impact your business. / Gross, Andrew D.; Huston, G. Ryan; Huston, Janet M.

In: Business Horizons, Vol. 57, No. 6, 2014, p. 759-765.

Research output: Contribution to journalArticle

Gross, Andrew D. ; Huston, G. Ryan ; Huston, Janet M. / The path of lease resistance : How changes to lease accounting treatment may impact your business. In: Business Horizons. 2014 ; Vol. 57, No. 6. pp. 759-765.
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