Abstract :
Despite the vast research on the issue of recognition versus disclosure of accounting information, little is known about the Egyptian credit officers’ reactions to, and perceptions of the faithful representation of the disclosed information. In this context, the current research addresses this issue using the operating lease, as one of the off-balance sheet transactions, in order to determine to what extent the Egyptian credit officers are efficient in dealing with recognized versus disclosed lease accounting information
In order to achieve the main aim of the current research, a 2×3 mixed factorial design was used in which the two variables of interest are manipulated as follows (i) the lease reporting format, as a within-subjects variable, and (ii) the audit committee strength, as a between-subjects variable, in order to determine whether its existence influences the perceived faithful representation of the lease accounting information
Results revealed that the Egyptian credit officers’ perception of the faithful representation of lease information is enhanced under the case of capitalizing leases or expanding the related disclosure to reflect the financial impact of lease, in terms of to what extent it reflects the true economic substance of lease, and whether the lease information is complete and free from bias. The perception of the faithful representation of lease accounting information is reflected, in turn, in credit officers’ decisions; more specifically, the decision to grant the lessee the required loan, and the determination of the interest rate to be charged, while the credit size is not significantly affected. Also, results indicated that the audit committee has no role in increasing the faithful representation of lease accounting information
Overall, the current research provides some evidence that Egyptian credit officers are efficient in dealing with the disclosed lease information. However, they accepted enhancing the lease disclosure as recommended by the researcher, since the current financial statements provide unfaithful representation of leases with uninformative disclosure. Consequently, it is concluded that the accounting information has its contractual role, provided being faithfully represented, regardless of the existence of the audit committee
Therefore, the researcher recommends, among other recommendations, revising the Egyptian Accounting Standard (EAS) No. 20 in such a way that enhances lease note disclosure, and adjusts its accounting treatment in order to represent the true economic substance of lease, not its legal form, as required under IFRS 16
Safaa Ahmed Mahmoud Mohamed Saleh
Alexandria University -2018
