Assessing the impact of operating lease capitalization with dynamic Monte Carlo simulation

摘要

The European Commission has recently adopted a new accounting standard for leases that will be implemented in 2019, which requires operating lease contracts to be included in the balance sheet, affecting key ratios, leverage and profitability. We simulate the impact of IFRS 16 using Monte Carlo method, which incorporates the uncertainty of the future value of variables when making predictions. Unlike prior studies based on historical data, our study considers a five-year forecast horizon and, more importantly, contemplates several probable scenarios. Based on the STOXX All Europe 100, our results confirm that, in 2019, liability maturity, liquidity and return on assets will decrease, leverage and return on equity will increase, but the figures do not change substantially after 2019. The results of this dynamic approach are consistent across the five scenarios considered; however, the impact of IFRS 16 is smoothed under the strategy of reducing the life of lease contracts.