Market Reaction to Finance Lease Capitalization from the View Point of Risk Assessment
The Market Reaction to the Finance Lease Capitalization from the View Point of Risk Assesment*
Eiko Sakai Musashi University 1-26-1 Toyotamakami Nerima-ku, Tokyo 176-8534 Phone: +81-3-5984-3774 e-sakai@cc.musashi.ac.jp First Draft April 23, 2010
Abstarcat The purpose of this paper is to investigate whether the market reaction associated with the movement of the finance lease disclosures from footnotes to the body of financial statemetns. I have chosen to examine a Japanese sample because I could obtain enough number of firms which were influenced by the change of accounting standard. The result showed that the market has not reacted on the average about having shifted to recognition from disclosure and the risk of specific industries was revised upward by standard revision. This means that investors were not able to foresee change of lessees’ decision rather than the footnote disclosure was inferior to recognition on balance sheets. Although the results of this paper are concerned with the capitalization of finance leases, they have sume implication for “Leases: Preliminaly Views” released by FASB and IASB. It is not necessary to extend the range of recognition of uncertain assets and liabilities because the footnote infromation is not infrior to the recognized information.
* This work was supported by Grant-in-Aid for Young Scientists (B) 20730312.
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Electronic copy available at: http://ssrn.com/abstract=1594748
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Introduction This paper examined change of risk assesment in the securities market by
information having shifted to balance sheet recognition from footnotes. Under Current Stadards (US and Japanese Standards and IFRS), there are two accounting models for leases, the finance lease model and the operating lease model1. Finance leases are defined as those leases that transfer to lessees substantially all the risks and rewards incidential to ownership of the lease assets, and all othere leases are operating leases. Leases classified as
Eiko Sakai Musashi University 1-26-1 Toyotamakami Nerima-ku, Tokyo 176-8534 Phone: +81-3-5984-3774 e-sakai@cc.musashi.ac.jp First Draft April 23, 2010
Abstarcat The purpose of this paper is to investigate whether the market reaction associated with the movement of the finance lease disclosures from footnotes to the body of financial statemetns. I have chosen to examine a Japanese sample because I could obtain enough number of firms which were influenced by the change of accounting standard. The result showed that the market has not reacted on the average about having shifted to recognition from disclosure and the risk of specific industries was revised upward by standard revision. This means that investors were not able to foresee change of lessees’ decision rather than the footnote disclosure was inferior to recognition on balance sheets. Although the results of this paper are concerned with the capitalization of finance leases, they have sume implication for “Leases: Preliminaly Views” released by FASB and IASB. It is not necessary to extend the range of recognition of uncertain assets and liabilities because the footnote infromation is not infrior to the recognized information.
* This work was supported by Grant-in-Aid for Young Scientists (B) 20730312.
1
Electronic copy available at: http://ssrn.com/abstract=1594748
1
Introduction This paper examined change of risk assesment in the securities market by
information having shifted to balance sheet recognition from footnotes. Under Current Stadards (US and Japanese Standards and IFRS), there are two accounting models for leases, the finance lease model and the operating lease model1. Finance leases are defined as those leases that transfer to lessees substantially all the risks and rewards incidential to ownership of the lease assets, and all othere leases are operating leases. Leases classified as