New leasing standards for IFRS and U.S. GAAP reporters are going to have M&A, banking, and valuation impacts for companies with material operating leases. The new standards require most operating leases (such as premise leases) to be capitalized on the balance sheet similar to capital/finance leases; rental and operating lease payments will no longer be reflected in reported EBITDA. This article from BDO’s Transaction Advisory team in Canada provides an overview of the business and valuation issues that may arise, and includes:
- Illustrative impacts to balance sheets and income statements for IFRS and U.S. GAAP reporters
- Potential implications for bank covenants, shareholder agreements, and earn-outs
- Possible approaches to address the impact of the new lease standards
- Considerations for ASPE reporters, even though ASPE remains unchanged
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