Lease Accounting Significance to Operational Efficiency in Commercial Real Estate: A Univariate Regression Approac

As generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) continue to merge, financial reporting and accounting governing organizations are pushing new regulations on institutions. New proposed lease accounting rules will have a fundamental impact on the way firms account for leased assets, profoundly changing balance sheet and lease transactions. In commercial real estate, current benefits from off-balance sheet financing in the lease vs. buy decision will go away, resulting in the leased asset reported on the balance sheet as an asset with the underlying debt as a liability rather than an operating expense for the period. This research effort posits a model whereby real estate monetization, efficient capital investment, and growth strategy have a statistically significant relationship to operational efficiency in commercial real estate as firms are challenged to revisit their portfolios or asset holdings and current decisions around capital structure. This quantitative research effort uses univariate regression analysis. This empirical approach explored the relationships between the model variables in the hypothesized models from a population of 119 publically traded firms with large lease portfolios from available secondary accounting data from a sample frame of over 50,000 companies. Findings from the study indicated that firms with large lease portfolios implementing FASB 13 should reevaluate their capital structure decisions, asset holdings determinations, real estate monetization policies, growth strategies and efficient capital investments to realize increased operational efficiency.