 Decision usefulness of whole-asset operating lease capitalizationsRoger C. Graham and Raymond D. King Advances in accounting, 2013, vol. 29, issue 1, 60-73 Abstract: Monson (2001) and Hepp and Scoles (2012) argue that some leased assets should be capitalized at the assets' purchase price (whole-asset value) rather than at the present value of future minimum lease payments (right-of-use asset value). The argument is based in part on the notion that the assets under lease generate future income not the obligation related to future lease payments. To test the notion we compare associations between capitalizations representing whole asset values and current and future return on assets (ROA) and return on equity (ROE) with capitalizations representing right-of-use asset values and current and future ROA and ROE. Our results indicate that the whole-asset annuity values are incrementally associated with future ROA and ROE over right-of-use asset values. We interpret our results to suggest that the current practice of capitalizing future lease payments does not fully reflect the income generation provided by leased assets. Keywords: Lease accounting; Minimum lease payments; Return on assets; Return on equity; Right-of-use; Whole-asset (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:29:y:2013:i:1:p:60-73 DOI: 10.1016/j.adiac.2013.03.006 Access Statistics for this article Advances in accounting is currently edited by Dennis Caplan More articles in Advances in accounting from Elsevier |
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