For a sample of S&P 500 firms with operating lease activity, we collect and catalog the information disclosed in 10-Ks regarding the expected balance sheet impact of adopting the new lease standard.  We investigate the determinants of timely, informative disclosure and find that disclosure is positively associated with size, Big 4 auditor and operating lease activity.  Contrary to claims that operating leases are used to obscure debt levels, we find firms with greater reliance on operating leases are more likely to provide timely, informative disclosure. However, firms with the strongest incentives to delay disclosure may reduce reliance on operating leases in anticipation of the new lease standard.  We examine operating lease activity in the years 2007-2017 and find an overall downward trend in operating lease activity.  Our evidence suggests that market participants may find transition period disclosures and changes in operating lease activity informative in assessing recognized lease liabilities under the new standard.

A Transparent Transition? An Investigation of Firm Disclosure Regarding the Expected Impact of the New Lease Standard.

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