The Effect of Accounting Standards Update No. 2016-2, Leases (topic 842) on the Hospitality Industry
Open Access
Author:
Boitano, Julia Marie
Area of Honors:
Accounting
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
Karl A Muller III, Thesis Supervisor Orie Edwin Barron, Thesis Honors Advisor
Keywords:
Operating Leases Capital Leases Lease Capitalization FASB Hospitality Industry
Abstract:
The Financial Accounting Standards Board (FASB) released a new standard on accounting for leases (Topic 842) in order to create more transparency in financial statements for its users. This new standard will no longer allow companies to keep leases classified as operating leases off the balance sheet. Instead, companies will be required to include a lease asset and lease liability on their balance sheet with every lease. This new standard will have a large impact on the financial statements and financial ratios of companies after it is enacted. This thesis will analyze the effect this new standard will have on the hospitality industry by looking at 10 hotel companies and 10 restaurant companies. These companies are the top 10 companies in both the Hotel, Casinos, and Resorts and Food Services industries on the Fortune 1000 listing. First, I will look at each company’s percent of operating versus capital leases. Then, the effects on the balance sheet and income statement will be analyzed as well as four financial ratios. These ratios include return on assets, debt to equity, debt to assets, and interest coverage. The impact on these ratios is the most important result of this research.
