Proper Accounting for Leases? A Study of Why Preparers Produce and Analysts Use Alternative Performance Measures that Reverse the Effects of IFRS 16

Sammanfattning

The introduction of IFRS 16 aimed to improve transparency by bringing lease obligations onto the balance sheet. However, evidence in this study shows that firms continue to report alternative performance measures (APMs) that explicitly aim to neutralize these effects. As prior evidence on such practices is very limited, little is known about their prevalence and implications in a broader setting. This thesis therefore examines the extent to which firms use APMs to offset IFRS 16 and how such adjustments affect capital market outcomes. Using a sample of large European listed firms, the study identifies numerous APM adjustments that reverse IFRS 16 effects, particularly for debt and leverage-related metrics. The analysis combines hand-collected APM disclosures with financial and analyst forecast data. Cross- sectional regressions and a dynamic difference-in-differences design are used to examine both the determinants and consequences of these adjustments. The results show that IFRS 16- neutralizing APMs are widespread and more prevalent among firms with higher lease intensity. However, there is no evidence that these adjustments impact analyst forecast accuracy, attainability or dispersion. Instead, their selective application raises concerns about reduced transparency and comparability, with potential implications for regulatory oversight.