Update 5 on Fieldwork Research Results

In Update 5 of  Fieldwork Research Results, we look at the valuation effects of leases with service elements which are part of the lease commitments. In other words, what is the effect on valuation if we include the entire lease payment, including services, in the calculation?

Not surprisingly, the capitalised value on the balance sheet rises, sometimes even sharply, depending on the term of the lease and the interest rate used. But apparently not so much, that companies are worried by it and choose to calculate only on the basis of the so-called bare annuity: the lease payment without the service components. Reason: ease of use in combination with the material size of the addition to the balance sheet which is better than expected.

Don’t forget that we are dealing with the really big boys here (listed on the stock exchange) with a very large balance sheet size.
A fleet of vehicles extra or a leased production line to counter the rising demand are balance sheet decisions in the margin.