Three studies on lease accounting : linking applied and pedagogical accounting research
University of Wisconsin--Whitewater
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Providing insights into managerial actions represents an ongoing objective and important contribution of business and accounting research. Leasing activities, given their magnitude and importance to operations and financing mix choices, provide a rich context for gaining insights into managerial decision-making and the related financial statement impacts. Further, given the significance of leased operations to retail firms, these chapters and their related hypotheses and activities emphasize the actions of retail firms’ management. This dissertation outlines three separate, but related, papers (presented as Chapters 2, 3, and 4) exploring financing and operating managerial decision-making in the context of lessee retail firms. Chapter 2 explores managerial actions and related financing decisions in anticipation of an impending change in accounting policy. This chapter employs an ex ante study approach to gauge the nature, timing, and extent of managerial actions before the mandated implementation date of a new leasing standard. Specifically, this study explores whether, and the degree to which, retailers have reduced other debt obligations to accommodate the additional lease liabilities that will be reflected as a result of the new standard. Chapter 3 studies managerial actions and related operating decisions by examining the degree to which operating lease expenses and the related lease commitments exhibit stickiness characteristics. This chapter presents an approach that uses, and builds on, the methodologies of the seminal work of Anderson, Banker, and Janakiraman (2003) where they found that a firm’s selling, general, and administrative expenses increase more with a sales increase than those expenses decrease with an equivalent sales decline. Finally, Chapter 4 presents an instructional case study and supporting materials that provide a link from the applied archival research studies to pedagogical approaches whereby managerial actions can be modeled by students. The case study asks students to make decisions about lease commitments and debt obligations in light of the impending leasing standard and its potential balance sheet impacts. The supporting materials provide a scaffolded design whereby students engage in classroom activities and are provided support to build the competencies necessary for analysis and presentation of the expected financial statement impacts. The case also requires students to make recommendations for managerial decisions. Together these chapters, which comprise the dissertation, seek to offer a unique approach whereby applied research is meaningfully and purposefully connected to pedagogical materials.