Article Title

The impact of lease accounting standards on airlines with operating leases: Implications for benchmarking and financial analysis

Authors

Paul Caster, Fairfield UniversityFollow
Carl A. Scheraga, Fairfield UniversityFollow
Michael J. Olynick, DeloitteFollow

Abstract

In 2016, the Financial Accounting Standards Board (FASB) has issued a new standard for lease accounting. The standard requires capitalization by lessees of most leases currently treated as rentals, i.e., those currently classified as operating leases under the existing standard for lease accounting. We examine the impact on airlines that currently make use of operating leases. Several key financial ratios are examined before capitalization and then after capitalization on a pro forma basis. The results indicate that working capital, leverage, and solvency change dramatically in a negative direction, and airline rankings based on those ratios also change, which has implications for benchmarking performance.

Recommended Citation

Caster, Paul, Scheraga, Carl A., and Olynick, Michael J. (2018). The impact of lease accounting standards on airlines with operating leases: Implications for benchmarking and financial analysis. Journal of Transportation Management, 28(1), 15-23. doi: 10.22237/jotm/1530403380

DOI

10.22237/jotm/1530403380