Bankers,
How are you handling this in comps / presentations now that operating lease liabilities are considered debt? CapIQ now includes this in the numbers, now drastically increasing EV in some cases. Are you adjusting EV to exclude lease liabilities, or netting the right of use asset against it? Or no adjustment at all, with multiples just increasing? Or using new EV/EBITDAR where it wouldn't have been used previously?
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The new FASB rule ASC 842 require: all leases over one year in duration to be capitalized for GAAP reporting. For EV calculations capital leases should be treated as debt. 2019 is the first year that all companies are required to capitalize leases over 1 year.
As a result of this accounting change, it is now easier to compare companies that tried to mask asset intensity of their operations by treating lt operating leases as off balance sheet liabilities. ebitda adjustments such as EBITDAR will be obsolete on a go forward basis.
I suppose whether this is captured in analyses may have varied Bank by Bank / transaction by transaction historically, but on a go forward basis I think the best practice is to treat them as debt.
If you do a google search you can find white papers from the big 4 on how to account for the change. But all public companies started reporting this way in calendar Q1 of this year.