Module II· EV-Equity BridgeIntermediate
Question
How do you treat operating-lease liabilities post-IFRS 16 in the bridge?
Answer
Mechanics
Since IFRS 16 (2019), operating leases sit on the balance sheet as lease liabilities. They are debt-like and are therefore deducted from EV.
Complication
Post-IFRS 16, EBITDA no longer contains any operating-lease expense (pre-IFRS 16 it did) − so the margin is arithmetically higher. This creates a structural break in the EV/EBITDA multiple across the 2018→2019 boundary.
Consistency
For cross-time comps (pre vs. post-IFRS 16), either restate them all or flag it explicitly.
Local-GAAP reporters (middle-market)
operating leases stay off-balance-sheet − check the notes for "hidden" lease debt.
Deep diveShow more details
Pitch tip
'Lease liabilities $120m as debt-like − consistent with sector treatment post-IFRS 16.'