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Homework answers / question archive / Accounting Accounting Research Project -------------------------------------------------------------------------------------------- Objectives of the Course This course is designed to provide students with research and communication skills that are essential in studying and analyzing academic and professional problems
Accounting Accounting Research Project
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Objectives of the Course
This course is designed to provide students with research and communication skills that are essential in studying and analyzing academic and professional problems. It aims at introducing students to independence and self-assessment of accounting and field-related problems or issues of interest. During the following course of actions, students learn about data sources, statistical applications, developing hypotheses, analyzing results, and reaching conclusions and recommendations for the issue under study.
Structure of the Course
In the first meeting, we lay out the general foundation such as identifying the research facilities in the school including databases and computer programs of general use in research such as SAS or SPSS. These programs are available on the school's mainframe and on PCs.
For the rest of the term, the course runs on a one-to-one basis:
Format of the Research Report (paper)
The research report is in fact a research paper. We recommend the following structure: the title of the paper and the student name are on the cover page. The body of the paper can be divided into the following sections:
Note: The above is a general framework for a research project. After completing the project in this form, we believe that students will gain training in researching and analyzing relevant (job/work assigned) problems and will be able to write and communicate reports to their superiors. Descriptive papers that analyze and synthesize the literature on an accounting topic are also acceptable.
Feel free to ask any questions that may clarify the requirements.
Good luck.
HARD COPY DATA
b. Financial
c. Transportation
e. Other services
LITERATURE REVIEW SOURCES
Journal articles and research theses can be a good source for learning about the specific subject you are researching.
ABI database can be an effective source for collecting materials and literature by subject.
Accounting 692Q: Accounting Research Project, Summer 2016
Economic Consequences of Off- Balance Sheet Lease Financing
A company financial and capital structure are built from the balance sheet liabilities and equities. These structures are the mechanisms by which creditors and owners share risks and rewards in proportion to their investment. The accounting equation:
Assets= Liabilities + Equities.
If this equation is distorted or manipulated, the objective of financial reporting is defeated and assessing management’s stewardship is questionable.
This paper will examine the problems with lease accounting. For practical purposes they are often ways to own something without showing it as an asset and without showing the required payments as a liability. Airline balance sheets often show they own few airplanes, if any, and have relatively little debt. Everyone knows this is misleading. Putting most leases on the balance sheet as assets with offsetting debts seemed like obvious thing to do. The big controversy is over income statement treatment. I will examine the determinants of operating lease, SEC reporting impacts, FASB/IRRS rules, most especially the impacts on financial ratios. Operating lease can be used as an off off-balance sheet financing so that it can increase company performance in financial reports. The purpose is to make balance sheet sheet more attractive to investors. This is known as off-balance sheet financing. This is more prevalent in the last few decades. Regulators have also expressed concerned that financial reporting may not reflect the underlying economics of financial transactions. Concerns of regulators notwithstanding, I believed that in an efficient market, the OBS accounting treatment should have no economic impact. Non-cancellable future lease payments under operating lease are not recognized on the balance sheet, but they do appear in the disclosure notes to the financial statements. With efforts, financial statements users should be able to adjust for accounting differences across operating leases and capital leases.
Off-balance-sheet financing is an accounting method whereby companies record certain assets or liabilities in a way that keeps them from appearing on the balance sheet. In off-balance-sheet financing, large capital expenditures are kept off a company's balance sheet to keep the debt to equity (D/E) and leverage ratios low, especially if the inclusion of a large expenditure would break negative debt covenants. Examples of off-balance-sheet financing include joint ventures, research and development (R&D) partnerships, and operating leases. In operating lease, the asset itself is kept on the lessor's balance sheet, and the lessee reports only the required rental expense for use of the asset.
Managers want to take on debt while reporting none or only some of it as liabilities on their balance sheets. The decision to keep debt on or off the balance sheet comes down to financial leverage. Operating and capital leases are directly related to whether a company wishes to obtain greater or lesser financial or operating leverage.
This study mainly aims to assess and understand the economic consequences of off-balance sheet lease financing. Through this study attention will be place on how with operating leases, the institution who owns the asset and leases it, keeps out the asset and liability on their balance sheet to report better profitability and leverage.
To properly design and complete the research work successfully, it very crucial to articulate the main aim and objectives of a research. Based on the underlying aims and objectives, research procedure will be designed. If the aim and objectives of a research is not clarified clearly, the design of the research procedure will be inaccurate. The key aim of this research is to observe economic consequences of off-balance sheet lease financing. The key objectives of the research as supportive to the achievement of aim of the study are as follows.
Development of research question enable the researcher to focus on the focal point that is required to resolve for achieving for meeting the aim of research study. The underlying research questions of this study are follows:
With operating leases, debt does not appear, thus reducing financial leverage with an increase in operating leverage. With a capital lease, the debt is recorded, expenses are financial, and financial leverage is hindered. Thus, management may try to provide a better looking balance sheet with lower reported debt to equity ratio, which usually results in driving their stock price higher.
The basic motivation behind choosing this research topic is that it is very necessary for a to understand how lease is one of the most common ways that is used for off-balance sheet financing and affect the reporting of true economic picture of a company. This research paper aims at understanding classifying how a lease as an operating lease provides a company with the opportunity to utilize the leased asset and assume a contractual obligation to pay the lessor during a specific period of time without having to report the asset and liability, thus to report improved profitability and leverage.
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This study illustrates economic consequences of off-balance sheet lease financing. From this study, a valuable insight will be obtained how deliberate classification of a lease transction as operating lease will positively affect profitability and leverage of the company. The study will have an implication for accounting bodies and accounting professionals.
Accounting bodies how operating lease as off-balance sheet activity disguise the true performance of reporting companies. These will try explore loophole and formulate and prescribe modified or new accounting standards to close the loophole and improve the reporting quality.
Accounting professionals will understand how operating lease as off-balance sheet activity may mislead the financial reporting as well as financial performance of a company. Accounting professionals will try to treat a lease based on economic substance of transactions so that investors are not misguided.
To get the research work successfully done, it is required to articulate a structure of the study that describes the manner in which the research works are being conducted. In order to be done in a systematic way, this research will entail the following steps.
Chapter # 01 Introduction
The first part of the study will covers details of the background of the research, aims and objectives of the research, development research questions, rationale of the study, and implication of the study to the accounting regulatory bodies and professional accountants, and structure of the study.
Chapter # 02 Background and Literature Review
The second part of the study will involves literature review where concepts and empirical past studies on concept of off-balance sheet activities, lease as off-balance sheet activity, finance & operating leases, accounting treatment of finance and operating leases, impact of Off- Balance Sheet lease financing on the profitability & the leverage of companies.
Chapter #03 Research Methodology
The third part of the study will discuss about the research methodology followed in carrying out this research. In this part, details regarding research philosophy, research deign, research method & analysis, and data collection in relation to this study will be pointed out.
Chapter # 04 Results Presentation, Analysis, and Discussion
In the fourth part of the study, the results and findings of the analysis will be presented, discussed, and analysed.
Chapter # 05 Conclusion
This is the final part of the study where based on answering of the research questions overall conclusion of the research will be drawn. Also, the scopes of future research or extended research will be mentioned.
