Business Case Studies & Business Publications

Landing the Deal: Delta’s Lease Strategy...

Hopkins, Justin J.

Exercise

Landing the Deal: Delta’s Lease Strategy in the LATAM Acquisition

Hopkins, Justin J.

C-2479 | Published May 31, 2024 | 21 Pages Exercise

Collection: Darden School of Business

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This exercise demonstrates the economic effect of accounting standards through the context of lease accounting. It is based loosely upon Delta Air Lines' (Delta's) acquisition of LATAM Airlines, which was enabled, in part, through a change in accounting standards that allowed Delta to avoid recording lease liabilities. Students learn how to account for lease agreements under US Generally Accepted Accounting Principles (GAAP) from a lessor perspective, and the manner in which credit agencies changed policies because of the change in accounting standards. It is taught in an 85-minute class in the residential MBA program at the University of Virginia Darden School of Business in the first-year elective “Financial Reporting.”

To understand, at a relatively high level, how different lease classifications can have differing effects on the balance sheet, income statement, and statement of cash flows.