The initial recognition of operating leases on balance sheets could have led companies’ equity valuations to shrink, new academic research suggests. Before the rule, which started going into effect in December 2018, public companies used to disclose operating leases in the footnotes of their financial statements. Photo: Karelle PhotographyFor the most part, public companies experienced little more than a one-time shock to their stock returns. Newsletter Sign-upThe effect on stock returns was especially noticeable for the retail industry, in which companies traditionally have significant operating leases. The first quarter of 2019 was particularly relevant because the U.S. public companies adopted the lease accounting standard during that time.

Source: Wall Street Journal January 28, 2020 00:00 UTC