The Impact of New Accounting Standards for Leases and Revenue Recognition on the Real Estate Strategy of Listed Hotel Firms

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Newly issued accounting standard revisions of the IASB and FASB concerning revenue recognition and leases have been received with great concerns by the hotel industry. This Thesis reviews what the combined effect is of these new accounting standards on the real estate strategies of listed hotel companies. A content analysis of corporate communications about the evaluation of the impact of the new standards and the future strategy is executed, with an additional comparison between the US and Europe. Leases are reduced by use of spin-offs to real estate investment trusts (REITs). This is also achieved by buying back leased assets and/or replacing them by franchising or management agreements, especially in Europe. Additionally, an increased popularity of variable lease contracts is observed and renegotiations of the contracts play a viable role in the changing real estate strategy. The lease accounting revisions are most important for changes in strategies. Opposing examples have been found as well, where the standards’ impact has been evaluated as significant but changes in the real estate strategy have not been communicated. This study provides an industry-wide comparison for decision makers. The findings add to Positive Accounting Theory by applying an approach that goes beyond quantitative methods, which assists accounting standard setters as well.
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