The Impact of Lease Accounting Standards on Lending and Investment Decisions

SYNOPSIS The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have released new lease accounting standards that differ in the recognition and presentation of lease expense. In this study, we predict and find that the effect of these new lease standards on judgments of financial statement users depends on their decision roles as lenders or investors and lease stages. Specifically, relative to the new FASB standard, the new IASB standard leads to more lending in the later stage of the lease but less investments in the earlier stage of the lease, and differences between the two lease standards have no impact on lending (investments) in the earlier (later) stage of the lease. Our findings inform practice by providing evidence on the differential effects of the new lease accounting standards at various lease stages on lenders’ and investors’ decisions. Data Availability: Contact the authors.