Stock valuations took a one-time shock in the first quarter of 2019, possibly because of the new lease accounting standards from the Financial Accounting Standards Board, according to an article in the Wall Street Journal. New academic research suggests that future accounting standards could have similar unfavorable consequences on businesses, the article says. The new rules require companies to treat operating leases as liabilities. U.S. public companies adopted the new rule in the first quarter of 2019. Private companies and nonprofits must implement the rule for the fiscal year and interim periods beginning after Dec. 15, 2020.

Last year, KPMG and Deloitte issued reports that examine the valuation impact of the similar IFRS 16 lease accounting rules, the KPMG International Valuation Newsletter (July 2019) and Deloitte’s “IFRS 16 Valuation Impact” (August 2019). The new rules are “likely to complicate the comparability of valuation multiples, particularly in the short term,” says the Deloitte report. KPMG advises: “A consistent approach is of the utmost importance when applying the multiple methods.”