AAA Spark Meeting of the Regions

ASC842 and Deferred Tax

• In Event: Topics in Taxation

Abstract

Currently, the FASB is in the post-implementation review process of lease accounting standard and calls for academic research on how lease standard is performing in the capital markets. This study provide evidence via the lens of tax and capital market consequences. Specifically, I examine the impact of leasing accounting standard-ASC 842 on market participants' reactions from the tax perspective around implementation from 2016 to 2021. Using difference-in-differences analyses, I find that relative to control firms, treatment firms are reporting higher temporary book-tax differences and experience greater market uncertainty. Further analyses show that the increase in market uncertainty of treated firms is mainly driven by the increase in the book-tax differences. My study contributes to the leasing accounting literature as well as implications of the ASC 842 from the tax perspective.

Author

• Yan Z. Woodard, Kent State University