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  • June 2020 (Revised February 2021)
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Accounting for Leases at American Airlines (A)

By: Jonas Heese, Gerardo Pérez Cavazos and Julia Kelley
  • Format:Print
  • | Language:English
  • | Pages:23
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Abstract

In March 2020, as coronavirus reduced demand for air travel, an analyst was forecasting American Airlines’ (American’s) first quarter financial results. To develop a forecast, she needed to familiarize herself with Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842),” passed four years earlier by the Financial Accounting Standards Board. ASU 2016-02 required companies to disclose all leases on their balance sheets, but it made an exception for leases with variable payments, allowing companies to leave such leases off-balance sheet. The Wall Street Journal estimated that more than 50% of American’s leases remained off-balance sheet due to the exclusion of variable leases. Should American and other companies be allowed to leave variable lease payments off-balance sheet? How did the decision to leave these payments off-balance sheet affect companies’ risk profiles and valuations?

Keywords

Accounting; Financial Reporting; Financial Statements; Finance; Governance; Corporate Accountability; Corporate Governance; Governing Rules, Regulations, and Reforms; Governing and Advisory Boards; Leasing; Accounting Industry; Air Transportation Industry; North and Central America; United States

Citation

Heese, Jonas, Gerardo Pérez Cavazos, and Julia Kelley. "Accounting for Leases at American Airlines (A)." Harvard Business School Case 120-069, June 2020. (Revised February 2021.)
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About The Author

Jonas Heese

Accounting and Management
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Related Work

    • June 2020 (Revised February 2021)
    • Faculty Research

    Accounting for Leases at American Airlines (B)

    By: Jonas Heese, Gerardo Pérez Cavazos and Julia Kelley
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    Accounting for Leases at American Airlines (A)

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    • February 2021
    • Faculty Research

    Accounting for Leases at American Airlines

    By: Jonas Heese
    • February 2021
    • Faculty Research

    Accounting for Leases at American Airlines (A) and (B)

    By: Jonas Heese and Gerardo Pérez Cavazos
    • June 2020 (Revised February 2021)
    • Faculty Research

    Accounting for Leases at American Airlines (A)

    By: Jonas Heese, Gerardo Pérez Cavazos and Julia Kelley
Related Work
  • Accounting for Leases at American Airlines (B) By: Jonas Heese, Gerardo Pérez Cavazos and Julia Kelley
  • Accounting for Leases at American Airlines (A) By: Jonas Heese
  • Accounting for Leases at American Airlines By: Jonas Heese
  • Accounting for Leases at American Airlines (A) and (B) By: Jonas Heese and Gerardo Pérez Cavazos
  • Accounting for Leases at American Airlines (A) By: Jonas Heese, Gerardo Pérez Cavazos and Julia Kelley
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