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FASB issued a new guidance in 2016 to improve financial reporting and increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new accounting standards update requires that virtually all leases to be reported on the balance sheet. This paper examines the possible impact of the new lease standards by examining specific financial ratios that are commonly used to evaluate financial performance and solvency. We believe our study is important to investors, lenders and companies. The results provide insight into the likely impact that FASB’s new guidance on leasing will have on financial statements. This may be critical to understanding a company’s valuation as well as determining its ability to meet specific debt covenants.
Roberta J Cable, Pace University
Patricia Healy, Pace University - Westchester
Claudia Li, Pace University