Module I· Lease Accounting (IFRS 16 vs. HGB)Advanced
Question
How does lease accounting differ in lease-heavy sectors such as retail versus aviation?
Answer
Mechanics
Lease accounting has major valuation implications in lease-heavy sectors. Two canonical examples:
Retail
- Primarily real-estate leases for stores and warehouses.
- Lease terms are often 5-10 years, with renewal options and variable rent as a percentage of sales.
- IFRS 16 effect is large: RoU assets and lease liabilities can be 30-50% of total assets, with a visible EBITDA step-up after adoption.
- Valuation practice: use pre-IFRS-16 EBITDA for retail comps and include the lease liability fully in net debt.
Deep diveShow more details
Aviation
- Aircraft leases, historically dominated by operating leases.
- Lease terms are often 5-12 years for narrow-body aircraft and 8-15 years for wide-body aircraft.
- IFRS 16 effect is very large because lease liabilities can run into billions.
- Special case: aircraft leasing is often complex, including sale-and-leaseback structures and group-internal leasing companies.
- Valuation practice: EV / EBITDAR (= EBITDA + rent) removes the lease effect for comps; add capitalized aircraft leasing to net debt using a 7-8x multiple.
EBITDAR is mainly a pre-IFRS-16 or US-GAAP operating-lease concept. Under IFRS 16, the lease effect already sits in D&A and interest, so post-IFRS-16 EBITDA is roughly comparable to pre-IFRS-16 EBITDAR only after aligning the reporting basis.
Pitch tip
Sector-specific EBITDA definitions matter: retail uses pre-IFRS-16 EBITDA, aviation uses EBITDAR, and logistics often uses lease-adjusted EBITDA. Cross-sector comps are rarely clean; document apples-to-apples adjustments.