Operating Lease Research Articles

Повторный лизинг как необходимая юридическая фикция

The article explores the issue of implementing the concept of re-leasing in Russia and examines the main fea-tures of the current regulatory and law enforcement practice concerning transactions that are currently used by civil turnover participants instead of this construct. The main obstacles preventing the direct extension of finan-cial lease regulation to this category of transactions without the introduction of legal fiction have been studied. The article evaluates the key advantages and, consequently, the market’s demand for such a construct in leas-ing services, as confirmed by judicial practice and the position of the Supreme Court of the Russian Federation. Additionally, the article considers methodological aspects of financial accounting and the differentiation of re-leasing as a subtype of financial leasing from rental (operational leasing), and offers proposals for amending the current legislation based on the Ministry of Economic Development’s draft law, with revisions that take into account the protection of the rights and legitimate interests of all parties to the re-leasing agreement.

REFLECTIONS OF TFRS 16 LEASES STANDARD ON FINANCIAL STATEMENTS APPLICATIONS ON AIRLINE COMPANIES

This study aims to identify reflections of Turkish Financial Report 16 Leases Standard (TFRS 16) on financial statements of two airlines companies. In other words, it was tried to identify changes resulting from TFRS 16 in the study. In the study, quantitative and qualitative analysis methods were used. While quantitative method is ratio analysis, qualitative method is document analysis. To perform the ratio analysis, various assumptions were used. For example, it was assumed floating interest rate was out of the question for lease payments. To perform the analyses, information was obtained from company reports. Prior to performing the ratio analysis, the balance sheets and comprehensive income statements of two prominent airlines in Turkey for the year 2017. Specifically, it focused on converting off-balance sheet liabilities associated with operational leases into capitalised amounts. Based on results of the analyses, it was determined that due to TFRS 16. Based on the TFRS 16, the revised balance sheets show no change in current assets. Non-current assets, current liabilities, and non-current liabilities have all experienced a growth, but equity has decreased. There has been a decline in the cost of sales. This condition has resulted in a rise in gross profit.

The Valuation Differences between Operating and Finance Lease Liabilities in US Firms

The Valuation Differences between Operating and Finance Lease Liabilities in <scp>US</scp> Firms

Green Wheels, Greener Wallets: Economic Viability of Last-Mile Delivery Fleet Electrification in Case of Latvia

The analysis of internal combustion engine vehicle (ICEV) usage habits in the DPD Latvija company and the study of the specifics of its last-mile delivery transport business will allow to understand whether electromobility solutions can make the company more efficient. The question addressed in the research is whether the electrification of the delivery vehicle fleet can reduce transport expenses for the company and under what conditions. For estimation of direct and indirect costs of transport acquisition and usage Total Cost of Ownership (TCO) is used. The company’s daily operation parameters and technical data of the used vehicles VW e-Crafter and VW Crafter 35 Kasten/long base are considered in the study. Net Present Value (NPV) and Internal Rate of Return (IRR) calculation methods are used for analyzing the investment project. The expense of the creation of electrical vehicle charging infrastructure is not considered, because the company’s daily routine allows to cover all charging processes overnight by using domestic sockets together with Mode 2 chargers. All technical data and calculations were made for deliveries in a city cycle. In financial terms of owning delivery transport, the company is using a 5-year operational lease with 0% first payment. The obtained results in terms of TCO comparison showed a slight advantage by using EV after 5 years of last-mile delivery service per 1 vehicle – 706.98 Euro at 31200km a year or 100km in the working day of 6-day working week (156000km in 5-year is under 160000 warranty condition). The calculation is performed for DPD Latvija 213 ICE vans of a total 240-vehicle fleet. Results of NPV, NPVI, and IRR with a comparison rate of 10.6% for EV case clearly show a sufficiently good return. The Net Present Value of the solution is 89271.92 Euro and the Internal rate of return is 48.05%. The study proves that the electrification of the last-mile delivery company's fleet is economically justified and within 5 years. In the process of electrification, the company will reduce its expenses – by 1.45%, which increases the net annual profit by 0.13%. The main conclusion is that the company will not incur losses by switching to an environmentally friendly vehicle, the capital investment in a realistic scenario pays off already from the 3rd year. Nevertheless, the authors of the study recommend evaluating delivery vehicles with higher driving range parameters, because during peak delivery and seasons with cold weather, the company may experience unplanned downtime and expenses due to the need for additional charging time at public charging networks on the road, that could lead to financial losses and need for TCO calculation corrections.

Performing Up to Par: Hospitality Firms After ASU 2016-02

Relative to sales, the average operating lease commitments of hospitality firms are 4 times larger than those of other publicly traded firms. In response to the recently enacted accounting standards update No. 2016-02 (ASU 2016-02) that requires lessees to recognize operating leases on their balance sheet, hospitality firms decreased their use of operating leases, switching to shorter-term off-balance sheet leases. We find that this change did not have negative consequences on firm performance, shareholders, or employees. The only significant effect we do find is an improvement in credit ratings for firms that reduced operating leases in response to the new standard. Our findings are inconsistent with the concerns some hospitality managers and academics expressed prior to the introduction of the standard.

Research on Demand side Reactive Power Compensation Operating Lease Mode to Adapt to the New Situation of Energy and Electricity

With the development of economy towards green and low-carbon, higher requirements are put forward for energy conservation and efficiency enhancement of power system. To solve the problem of high initial investment and high risk of demand side reactive power compensation, this paper proposes a demand side reactive power compensation operating lease model. Power grid companies and equipment manufacturers combine service providers to undertake different division of labor and jointly serve users. The cost-benefit model of each participant is established, Optimize service fees with the goal of maximizing the net income of both users and service providers, and solved by chaotic cat swarm algorithm, An asymmetric Nash negotiation model is established to allocate service fees between power grid companies and equipment manufacturers. Finally, an example is given to demonstrate the effectiveness of the proposed method.

UPDATE OF REGULATORY DOCUMENTATION FOR RENTAL HOUSING DESIGN

The article considers proposals for making specific changes to regulatory documents that are necessary at the current stage.&#x0D; The rental housing market for temporary residence is a way to solve the problem of providing citizens with housing. Moreover, at this stage, this problem is actualized in connection with the war, destruction and displacement of a large number of citizens. Analysis of the current regulatory framework has shown that there is currently a discrepancy between regulatory requirements and restrictions to the real needs of life. The following regulatory restrictions in the design and operation of rental housing are considered: time of insolation of residential premises; level of building density; the possibility of integrating public infrastructure and creating multifunctional complexes.&#x0D; Currently, the Law of Ukraine "On Rental Housing" has been adopted in the first reading. In general, this Law has not yet been adopted. According to the draft Law, rental housing can be located both in separate buildings and in multi-functional complexes. But it is also necessary to bring to public discussion the norm, which is laid down in this draft of the Law "On Rental Housing", that residential premises or rental apartments cannot be purchased by residents as their own property. Although, for the development of this type of housing, it would be reasonable to provide the tenant with the opportunity to buy the housing over time, that is, to allow the processes of operational leasing with these apartments - renting housing with purchase. It was this opportunity that could become the impetus for highlighting regulatory requirements for expanding the typological range of housing for temporary residence.&#x0D; The existing regulatory framework of Ukraine does not define "Rental housing" as a separate typological unit.&#x0D; At the same time, the functional purpose of housing for temporary residence includes such premises as residential apartments, apart-hotels, hotel apartments and others - public buildings.&#x0D; The class of residential buildings, according to the norms, includes only such type of individual accommodation as dormitories, with the definition of separate regulatory restrictions and requirements for this type.&#x0D; So, the task at the moment is to include in the regulatory framework of Ukraine exactly this type of buildings, such as rental residential buildings.

USE OF LEASING IN ACTIVITIES ENTERPRISES AND RATIONALE FOR SELECTION ITS FORMS

The article discusses the possibilities of using financial and operational leasing by an enterprise, methods of accruing leasing payments. The purpose of this study is to identify the most cost-effective sources of financing for the renewal of fixed assets. One of the options for solving this problem can be leasing, which combines many effective forms and methods of investment and allows you to take into account the interests of all parties to the transaction. Materials and methods. The object of the study was the main production assets of enterprises, the subject – an assessment of the effectiveness of the use of leasing in the activities of enterprises. The informational basis of the article was made up of: regulatory and legislative materials regulating leasing activities, theoretical foundations of leasing, reporting by Dorex JSC, Internet sources. The methodological apparatus of the study is represented by the following scientific methods: economic and statistical analysis, the method of financial ratios, financial and economic analysis. Results. Thanks to such a tool as leasing, the lessee acquires the opportunity to use the property necessary for its activities without a one-time mobilization of its own or borrowed resources. Three main methods for calculating lease payments used by domestic economists are identified. In the course of the study, using the example of Dorex JSC, the optimal form of leasing was chosen, as well as a comparison of sources of financing for the acquisition of fixed assets and an assessment of the effectiveness of the use of leasing in the activities of the organization in question. Conclusions. The use of leasing can be an effective way to mobilize and expand production, allowing to reduce the tax burden and ensure the stability of the enterprise.

Did the Recognition of Operating Leases Cause a Decline in Equity Valuations?

We examine whether investors display a lack of attention by not incorporating relevant public information into equity valuations. Beginning in 2019, ASC 842 requires the recognition of operating leases, which were previously only disclosed in the financial statement footnotes. This change in accounting standard results in firms with significant operating leases recognizing a considerable increase in debt. We find that firms with significant operating leases, on average, earned negative stock returns around the initial recognition of their operating leases. We find that the negative reaction to operating lease recognition does not vary with firm-level proxies for investor attention, which suggests a pervasive lack of attention to operating lease disclosures prior to ASC 842. Our results provide new evidence consistent with investors suffering from limited attention and equity prices reflecting a lack of fundamental analysis.

Bibliometric analysis of publications on leasing

Introduction. The relevance of leasing issues for Ukraine is due to the fact that its economic and social development is largely influenced by the amount of investment in the fixed assets of enterprises, which ensures their competitiveness, promotes the development of small and medium-sized businesses and the creation of new jobs. In this regard, it is necessary to provide a scientific and methodological basis that will become the ground for the spread of leasing and its development in Ukraine.. The purpose of the work is to conduct a quantitative bibliometric analysis of scientific publications on leasing based on the international scientific database Scopus from Elsevier. Methodology. To achieve the goal, general scientific methods of analysis and synthesis, logical generalization and comparison were applied, graphic and tabular methods were used to present the research results. The built-in toolkit of the Scopus international database from Elsevier was used to conduct the bibliometric analysis. The analysis was carried out on the basis of publications indexed in the Scopus database in the period from 1992 to 2022 for the query «leasing». To increase the accuracy of the search, the search results were limited to certain subject areas. In total, 1,325 publications were processed, among them 789 were scientific articles. Results. As a result of the conducted research, a growing trend of the spread of scientific research on leasing issues in the world with stabilization at a high level in recent years was revealed. The largest number of publications on leasing during the analyzed period was recorded in 2011 (91 publications) and in 2019 (79 publications). The geography of publications showed that researchers from the USA, China, the European Union, the russian federation, and Great Britain made the greatest contribution to the development of leasing issues. Their scientific research was financed mainly from the funds of state institutions. The analysis of the most cited publications in the field of operational and financial leasing revealed the emphasis of researchers on the marketing activities of enterprises and ensuring their competitiveness. The obtained results of the study make it possible to determine the actual problems of organizing, conducting and controlling activities in the field of leasing, taking into account temporal, geographical and subject dimensions.

Operating Lease Recognition and Credit Assessment by Banks

Operating Lease Recognition and Credit Assessment by Banks

Hidden in Plain Sight: Operating Lease Accounting and Private Loan Contracts

Hidden in Plain Sight: Operating Lease Accounting and Private Loan Contracts

Economic consequences of operating lease recognition

Accounting Standards Update No. 2016–02 (ASU 2016–02) generated considerable debate between managers and standard setters. We find evidence that after issuance of ASU 2016–02, lessee firms decreased their use of long-term operating leases, increased their use of short-term operating leases, and increased their use of capital expenditures. The shift from long-term operating leases to capital expenditures is more pronounced for firms that had greater reporting incentives to use operating leases prior to ASU 2016–02. However, we find no evidence that the change in leasing behavior leads to negative outcomes predicted by managers (i.e., no evidence of a decrease in reported firm performance, a decrease in firm value, increase in firm risk, decrease in credit ratings, increase in debt covenant violations, or decrease in employment). Our study adds to the literature on the real impacts of accounting standards on managers' investment behavior and economic consequences for lessee firms and their stakeholders.

Indirect impacts of commercial gold mining on adjacent ecosystems

Mining is important for economic development in many tropical countries, but mining can have serious impacts on biodiversity, both directly through operations at extraction sites, and indirectly via wider social-economic development. However, mitigation efforts by large-scale mining operators focus almost exclusively on extraction sites. We provide a rare assessment of mining impacts on vegetation structure and biodiversity with increasing distance from three commercial gold mines of varying ages in Tanzania (0 years, 8 years, and 19 years since establishment).We show that mining is associated with impacts that manifest largely outside operational lease boundaries. At the two older mine sites, aboveground carbon and tree stem density are significantly higher within lease boundaries compared to outside, while there is no such effect at the new site. Further, tree stem density, aboveground carbon, and tree and butterfly species richness all decrease with increasing distance from extraction sites, with these effects again increasing with mine age. Frugivorous bird species richness is lower outside older mines, while abundance declines in frugivorous and granivorous birds are associated with declines in tree stem density, which may have implications for forest regeneration.These impacts result from new and expanding settlements around mining concessions between 2000 and 2019 and associated demand for timber and fuelwood. We recommend rigorous, integrated impact assessments and conservation planning in mining landscapes, to pre-empt the development of settlements and secondary industries around mining sites and so balance outcomes across the mining sector, natural resource-based and other livelihoods, and conservation agendas.

LESSONS LEARNED FROM NEW LEASING STANDARDS: VALUATION IMPLICATIONS OF VARYING IMPLICIT DISCOUNT RATES ACROSS OPERATING AND FINANCING LEASES

Under the new accounting standards for leases (ASC Topic 842), assets and liabilities relating to operating leases are recognized on corporate balance sheets. Before the adoption of ASC Topic 842, assets and liabilities relating to operating leases must be estimated by discounting future operating lease payments. Many assumptions are employed in this estimation method, including the timing and amounts of future lease payments, as well as inherent discount rates. New disclosures per ASC Topic 842 reveal that certain commonly used assumptions employed in estimating assets and liabilities related to operating leases are not accurate. This paper outlines a common method used to estimate assets and liabilities related to operating leases, including a detailed example, and discusses the impact of recently revealed assumption errors on valuation estimates.

A pay-as-you-use business model for the greening of shipping

Driven by the latest regulatory development in shipping, the maritime industry shows coupled commercial interest from technology providers and shipowners (or operators) to promote and operate greener ships. Acknowledging, that green technologies come with a premium, the missing part of the equation is no other than a feasible and affordable source of finance to bridge the gap. As access to capital from traditional sources becomes either scarce or less attractive, alternative methods should be devised.Alternative financial schemes that promote greening require further research and development. In this work, the pay-as-you-use (PayU) is presented. PayU aims at finding an optimum solution for both shipowners and technology providers, considering operational leasing and the outcome-based contract (OBC) concepts and applications. Leasing and OBC approaches are widely applied in other industries and show strategic fit and potential application for the greening of shipping. The model results in an optimum curve of NPV/NAL as a decision support tool for negotiation and greening technology selection purposes.

FEATURES OF THE ORGANIZATION OF ACCOUNTING OF OWN AND RENTED FIXED ASSETS AT THE COMMERCIAL ENTERPRISE

In the context of the coronavirus pandemic and the crisis in Ukraine’s economy, the affected industries were retail. Retailers were forced to reduce their activities, which led to significant sales of their own fixed assets, to the transition to the use of leased fixed assets, as increased the need for more efficient use and organization of accounting of own and leased fixed assets in retail. The purpose of the study is to consider the features of the organization of accounting of own and leased fixed assets on the example of a small retail business. The article analyzes the composition of fixed assets, their dynamics and structure in a commercial enterprise. Features of the organization of accounting of fixed assets are considered. Considerable attention is paid to the peculiarities of accounting for fixed assets taken into both operating and financial leases. Features of financial and operating lease of fixed assets are described. Features of depreciation and inventory of own and leased fixed assets at small retail enterprises are revealed. We compared the basic norms of own and leased fixed assets according to the Regulations (standards) of accounting and International Accounting Standards.

The Impact of Operating Lease Capitalization on Financial Statements in Indonesia

PSAK 73 is a new accounting standard that introduces a single accounting model for lessees, namely recording their rental activities as capital leases. This study aims to determine the impact of operating lease capitalization on financial statements. This research is a type of quantitative research using secondary data in the form of annual reports and company financial statements. The object of this research is a company listed on the Indonesia Stock Exchange for the period 2018-2019 which discloses the value of future minimum lease payments on operating leases in the financial statements. Data analysis methods include descriptive statistical testing and Wilcoxon signed-rank test. The results show that operating lease capitalization has a significant effect on unrecorded lease liability, unrecorded lease assets, equity, and financial ratios. Also, empirical evidence shows that there are tax savings from operating lease capitalization

Accounting for rental fixed assets

The article systematizes the basic requirements for the formation in accounting of information about fixed assets when they are received or provided for a fee for temporary use, as well as the conditions and criteria for recognizing accounting objects as lease accounting objects. Specific examples show how to determine the present value of lease payments, the net worth of an investment in a lease, and the amount of interest accrued. Organizational and methodological recommendations are proposed for rationalizing the accounting of operations of operating and non-operating (financial) lease of fixed assets, respectively, from the lessee and the lessor.

The different impacts of heterogeneous lease assets on the costs of debt: a risk-sharing perspective

ABSTRACT We examine whether the credit market participants price operating lease differently from finance lease in the perspective of risk sharing. Using a unique setting that the new lease standard is enforced in China since 2019, we find that operating (finance) lease asset shares are negatively (positively) related to lessees’ costs of debt, the risk-sharing role of operating lease assets is a mechanism of reducing COD, and this effect is more significant at firms with more financial constraints and insufficient cash flow. We fill the gap in the literature with a contribution to separate the risk-sharing effect from the accounting treatment effect in the association between two kinds of lease and costs of debt. These findings have important implications for policymakers and companies.