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Article: The impact of constructive operating lease capitalisation on key accounting ratios
- Article from:
- Accounting and Business Research
- Article date:
- October 1, 1998
- Author:
CopyrightCopyright Institute of Chartered Accountants in England and Wales Autumn 1998. Provided by ProQuest LLC. (Hide copyright information)
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Vivien Beattie, Keith Edwards and Alan Goodacre*
Abstract-Current UK lease accounting regulation does not require operating leases to be capitalised in the accounts of lessees, although this is likely to change with the publication of FRS 5. This study conducts a prospective analysis of the effects of such a change. The potential magnitude of the impact of lease capitalisation upon individual users' decisions, market valuations, company cash flows, and managers' behaviour can be indicated by the effect on key accounting ratios, which are employed in decision-making and in financial contracts. The capitalised value of operating leases is estimated using a method similar to that suggested by ...