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|Title:||Converting financial statements: operating to capitalised leases|
|Citation:||Pacific Accounting Review, 2017; 29(1):34-54|
|Wei Xu, Robyn Alexandra Davidson and Chee Seng Cheong|
|Abstract:||Purpose – The purpose of this paper is to examine how capitalising operating leases under IFRS 16/AASB 16 affects the financial statements and value relevance of financial information. In doing so, limitations of exiting methods are highlighted and improved upon. Design/methodology/approach – Imhoff et al.’s (1991) constructive method for capitalising operating leases is improved upon and used to restate the financial statements of 165 S&P/ASX200 companies. The financial position, key ratios and value relevance are tested for significant differences. Findings – The results provide evidence that capitalising operating leases affects financial statements and value relevance. Originality/value – Imhoff et al.’s (1991) constructive method has been refined, providing an improved method for capitalising operating leases than the one that has been used in the past. From a practical perspective, this research provides evidence supporting the “right-of-use” method proposed by the IASB which will see previous off-balance-sheet leases recognised.|
|Keywords:||Value relevance; AASB 16; capitalised leases; constructive method; IFRS 16; leases|
|Rights:||© Emerald Publishing Limited|
|Appears in Collections:||Economics publications|
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