ACCT 302 Week 2 Research Paper Topic Example

Topic Proposal: Did Putting Leases on the Balance Sheet Change How Managers Decide to Lease?

Working Title and Topic

Working title: Did ASC 842 Change How Managers Decide to Lease? Spiceland et al. (2018) explain that, under the new lease standard, any lease running beyond a year now puts two items on the lessee's books, the obligation to pay and the asset it may use, ending the long-standing practice of leaving operating leases in the notes. Operating lease expense still appears on the income statement as a single straight-line cost, but the obligation now sits beside bonds and notes payable. For many retailers, airlines and restaurant chains, reported liabilities rose substantially when the standard took effect in 2019.

Research Question

Did the requirement to recognize operating leases on the balance sheet change managers' decisions about whether, how and on what terms to lease assets, or did it change only how existing leases are reported?

Significance for Managerial Accounting

Managerial accounting teaches that decisions should rest on relevant future cash flows, and the lease-or-buy decision is a standard capital budgeting problem. In theory, moving a lease from the notes to the balance sheet changes no cash flow and should change no decision. In practice, managers are evaluated on ratios and return measures, and debt covenants and bonus plans are often written in accounting numbers. If a reporting rule changes what managers choose, then the accounting has become part of the economics, and that is a managerial accounting question. Eaton et al. (2021) found evidence that leasing has served as a channel through which managers over-invest, which suggests that how leases are measured affects the discipline applied to them.

How the Evidence Will Be Gathered

The paper will combine three bodies of research. Theory on why firms lease, especially Eisfeldt and Rampini's (2009) argument that leasing gives financially constrained firms more debt capacity because lessors can repossess assets easily, will explain the economic reasons for leasing that the standard should not disturb. Research on managers' incentives will show why reported numbers can still matter. Studies of the period after the standards took effect will test whether behavior changed, including Heese et al. (2025) on the shift toward variable lease payments that ASC 842 leaves off the balance sheet, Kusano and Yamashita (2026) on loan spreads after lease recognition in Japan and Zhou and Fan (2025) on uncertainty arising from new book-tax differences.

Planned Outline

The paper will cover the economics of the lease-or-buy decision, the change from the old to the new lease model, managers' incentives tied to reported numbers, evidence on how lease contracts and lending changed after adoption and implications for managers who make leasing decisions.

Preliminary Resources

Eisfeldt and Rampini (2009) on leasing and debt capacity; Eaton et al. (2021) on leasing and managers' investment decisions; Heese et al. (2025) on variable leases under ASC 842; Kusano and Yamashita (2026) on loan spreads after IFRS 16; Zhou and Fan (2025) on ASC 842, book-tax differences and market uncertainty; and Spiceland et al. (2018) for the accounting itself.

Scope

U.S. lessees will be the subject, in the years since 2019, with the Japanese evidence used only as a comparison, without attempting a full survey of international lease accounting.

References

Eaton, T. V., Nichols, C., Wahlen, J., & Wieland, M. (2021). Managers' investment decisions: Incentives and economic consequences arising from leases. Journal of Risk and Financial Management, 14(4), Article 165. https://doi.org/10.3390/jrfm14040165

Eisfeldt, A. L., & Rampini, A. A. (2009). Leasing, ability to repossess, and debt capacity. The Review of Financial Studies, 22(4), 1621-1657. https://doi.org/10.1093/rfs/hhn026

Heese, J., Shin, A., & Wang, C. C. Y. (2025). Variable leases under ASC 842: First evidence on properties and consequences. Review of Accounting Studies, 30(3), 2218-2263. https://doi.org/10.1007/s11142-025-09899-z

Kusano, M., & Yamashita, T. (2026). Does recognizing operating leases influence loan spreads? Evidence from Japan. Journal of International Accounting Research, 25(2), 83-106. https://doi.org/10.2308/jiar-2024-015

Spiceland, J. D., Nelson, M. W., & Thomas, W. B. (2018). Intermediate accounting (9th ed.). McGraw-Hill Education.

Zhou, Y., & Fan, S. (2025). Lease accounting standard (ASC 842), temporary book-tax differences, and capital market uncertainty. Journal of Corporate Accounting & Finance, 36(4), 108-126. https://doi.org/10.1002/jcaf.22794