Firm Performance Under ASC 842

Nicole Choi, Casey Frome, Mitchell Oler


In this paper we examine the effects of the leasing standard, Accounting Standards Codification (ASC) 842, on firm performance. Although the new standard has not directly affected firm operations, we hypothesize that because it requires the recognition of all lease assets and liabilities on the balance sheet, regardless of whether the lease is deemed to be operating or financing (legacy capital), firm debt contracts will become more constrained. The resulting constraints will force firms to either make inefficient operating changes or face increased financing costs. While controlling for contract type (either floating or fixed GAAP), we find firms with higher operating lease asset use and subject to floating GAAP tend to have lower future performance (return on assets) and decreasing returns. In this paper we address FASB’s call for a post-implementation analysis on new standards and specifically ASC 842.

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Copyright (c) 2024 Nicole Choi, Casey Frome, Mitchell Oler

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Accounting and Finance Research
ISSN 1927-5986 (Print)   ISSN 1927-5994 (Online) Email:

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