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Recognition versus Disclosure: An Investigation of the Impact on Equity Risk Using UK Operating Lease Disclosures
Author(s) -
Beattie Vivien,
Goodacre Alan,
Thomson Sarah
Publication year - 2000
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00352
Subject(s) - equity (law) , lease , actuarial science , balance sheet , argument (complex analysis) , perspective (graphical) , accounting , constructive , economics , business , finance , law , political science , computer science , biochemistry , chemistry , artificial intelligence , process (computing) , operating system
This study examines the equivalency of accounting recognition versus disclosure. OLS regression analysis is used to determine whether there is an association between equity risk and an adjustment to financial risk for off‐balance sheet operating leases. Two methods of adjustment are considered: constructive capitalisation and a simple factor method. The observation of a reliably positive association suggests that UK investors/analysts view operating leases from a property rights perspective rather than an ownership perspective. This supports the argument for recognition of all lease rights and obligations ‘on‐balance sheet’, as proposed in the recent G4+1 discussion paper ASB (1999).