Formal recognition versus off-balance sheet disclosure: a New Zealand perspective
|dc.contributor.author||McClean, M J||en_NZ|
|dc.identifier.citation||McClean, M. J. (2006). Formal recognition versus off-balance sheet disclosure: a New Zealand perspective (Dissertation, Bachelor of Commerce with Honours). Retrieved from http://hdl.handle.net/10523/1175||en|
|dc.description.abstract||The issue of the formal recognition of financial events versus off-balance sheet disclosure has become more prominent in the accounting research literature ever since the United States Financial Accounting Standards Board’s request in 1992 for more research into this matter. As the current lease accounting standards adopted in many countries prescribe disclosure requirements that enable the users of financial statements to re-cast financial statements as if non-cancellable operating leases had been capitalised at their inception. the main focus of this research has centred on the treatment of these off-balance sheet commitments. The purpose of this study is to contribute to the literature in this area by examining whether the New Zealand capital market efficiently incorporates non-cancellable operating lease information into its equity risk assessments. To examine this issue, ordinary least squares regression is performed on models relating a market-based measure of total equity risk to accounting measures of asset and financial risk. Two approaches are used to capitalise the non-cancellable operating leases. The first method, the capitalisation method development by Imhoff, Lipe and Wright (1991), capitalises the off-balance sheet commitments in a manner consistent with the current treatment of finance leases. The second method, known as the factor method, is an inaccurate method believed to be frequently used by market participants. The results suggest that the New Zealand capital market does not incorporate non-cancellable operating lease information into its equity risk assessments. No association is found between total equity risk and the non-cancellable operating lease information under the two capitalisation approaches. Accordingly, it appears that in a New Zealand environment and with respect to non-cancellable operating lease information. off-balance sheet disclosure is not an adequate alternative to formal recognition.||en_NZ|
|dc.title||Formal recognition versus off-balance sheet disclosure: a New Zealand perspective||en_NZ|
|otago.school||Accountancy and Business Law||en_NZ|
|thesis.degree.discipline||Accountancy and Business Law||en_NZ|
|thesis.degree.name||Bachelor of Commerce with Honours|
|thesis.degree.grantor||University of Otago||en_NZ|
|otago.school.eprints||Accountancy & Business Law||en_NZ|
|dc.description.references||Beattie, V.A., Edwards, K. and A. Goodacre (1998) The Impact of Constructive Operating Lease Capitalisation on Key Accounting Ratios, Accounting and Business Research, 28(4), pp. 233-254. Beattie, V.A., Goodacre, A. and S. Thomson (2000a) Operating Leases and the Assessment of Lease-debt Substitutability, Journal of Banking and Finance, 24(3), pp. 429-470. Beattie, V.A., Goodacre, A. and S. Thomson (2000b) Recognition versus disclosure: an investigation of the impact on equity risk using United Kingdom operating lease disclosures, Journal of Business Finance and Accounting, 27(9 and 10), pp. 1185-1224. Beaver, W., Kettler, P. and M. Scholes (1970) The association between market determined and accounting determined risk measures, The Accounting Review, 45(4), pp. 654–682. Bennett, B.K. and M.E. Bradbury (2003) Capitalising Non-cancellable Operating Leases, Journal of International Financial Management and Accounting, 14(2), pp. 101-114. Bernard, V. and K. Schipper (1994) Recognition and disclosure in financial reporting, Paper presented at the American Accounting Association/Financial Accounting Standards Board Financial Reporting Research Conference. Block, F.E., Cottle, C. and F. Murray (1988) Graham and Dodd’s Security Analysis, New York: McGraw-Hill. Bowman, R.G. (1979) The Theoretical Relationship Between Systematic Risk and Financial (Accounting) Variables, The Journal of Finance, 34(3), pp. 617-630. Bowman, R.G. (1980) The Importance of a Market-Value Measurement of Debt in Assessing Leverage, Journal of Accounting Research, 18(1), pp. 242-254. Breton, G. and R.J. Taffler (1995) Creative accounting and investment analyst response, Accounting and Business Research, 25(98), pp. 81-92. Christie, A. (1982) The stochastic behaviour of common stock variance, Journal of Financial Economics, pp. 407-432. Dresdner Kleinwort Benson (1998) Operating leases: the retail house of cards, Dresdner Kleinwort Benson Research, London. Ely, K.M. (1995a) Cross-Sectional Differences in the Relation between the Accounting Return on Assets and Equity Risk, Journal of Accounting, Auditing and Finance, 10(3), pp. 437-458. Ely, K.M. (1995b) Operating Lease Accounting and the Market's Assessment of Equity Risk, Journal of Accounting Research, 33(2), pp 397-415. Fama, E.F. and K.R. French (1992) The cross-section of expected stock returns, Journal of Finance, 47(2), pp. 427-465. Gallery, G. and E.A. Imhoff (1998) Disclosure versus recognition: some evidence from the Australian capital market regarding off-balance sheet leasing, Paper presented at the University of Melbourne, Research Seminar Series. Gopalakrishnan, V. and M. Parkash (1996) The debt-equivalency of recognized vs. disclosed obligations: an examination of borrower and lender perceptions, Research in Accounting Regulation, 10, pp. 63-77. Hamada, R.S. (1972) The effect of the firm’s capital structure on the systematic risk of common stocks, Journal of Finance, 27(2), pp. 435–452. Healy, P.M. and J.M. Wahlen (1999) A Review of the Earnings Management Literature and Its Implications for Standard Setting, Accounting Horizons, 13(4), pp. 365-383. Houlihan, W.A. and A.C. Sondhi (1984) De Facto Capitalisation of Operating Leases: The Effect on Debt Capacity, Corporate Accounting, 2(3), pp. 3-13. Imhoff, E.A., Lipe, R.C. and D.W. Wright (1991) Operating Leases: Impact of Constructive Capitalisation, Accounting Horizons, 5(1), pp. 51-63. Imhoff, E.A., Lipe R.C. and D.W. Wright (1993) The Effects of Recognition Versus Disclosure on Shareholder Risk and Executive Compensation, Journal of Accounting, Auditing and Finance, 8(4), pp. 335-368. Imhoff, E.A., Lipe, R.C. and D.W. Wright (1997) Operating Leases: Income Effects of Constructive Capitalization, Accounting Horizons, 11(2), pp. 12-32. Johnson, L.T. (1992) Research on Disclosure, Accounting Horizons, 6(1), pp. 101-103. Lipe, R.C (2001) Lease Accounting Research and the G4+1 Proposal, Accounting Horizons, 15(3), pp. 299-310 Miller, M. and F. Modigliani (1958) The cost of capital, corporation finance, and the theory of investment, American Economic Review, 48, pp. 261–297. Miller, M. and F. Modigliani (1963) Corporate Income Taxes and the Cost of Capital: A Correction, American Economic Review, 53(3), pp. 433-443. Monson, D.W. (2001) The Conceptual Framework and Accounting for Leases, Accounting Horizons, 15(3), pp. 275-287. Munter, P. and T.A. Ratcliffe (1983) An assessment of users reactions to lease accounting disclosure, Journal of Accounting, Auditing and Finance, 6(2), pp. 108-114. Oswald, D. (2000) Discussion of Recognition versus Disclosure: An Investigation of the Impact on Equity Risk Using UK Operating Lease Disclosures, Journal of Business Finance & Accounting, 27(9&10), pp. 1225-1232. Rubenstein, M. (1973) A mean-variance synthesis of corporation financial theory, Journal of Finance, 28(1), pp. 48-54. Ryan, S.G. (1997) A survey of research relating accounting numbers to systematic equity risk, with implications for risk disclosure and future research, Accounting Horizons, 11(2), pp. 82–95. Wilkins, T. (1984) A behavioural investigation of alternative methods of financing capital acquisitions and lease capitalisation, Accounting and Business Research, 14(56), pp. 359-366. Wilkins, T. and I. Zimmer (1983a) The effect of alternative methods of accounting for leases – an experimental study, Abacus, 19(1), pp. 64-75. Wilkins, T. and I. Zimmer (1983b) The effect of leasing and different methods of accounting for leases on credit evaluations, The Accounting Review, 58(4), pp. 748-764.||en_NZ|
Files in this item
There are no files associated with this item.
This item is not available in full-text via OUR Archive.
If you would like to read this item, please apply for an inter-library loan from the University of Otago via your local library.
If you are the author of this item, please contact us if you wish to discuss making the full text publicly available.