If the U.S. adopted the IAS treatment of financial leases, what would happen to the average company’s: 1. Return on equity; and 2. Current ratio a) Increase / No Change b) Decrease / No Change c) Increase / Increase d) Decrease / Increase
Does IAS expense all leases? If so B?
B
No it’s A I’m afraid (acc Schweser). What I wan’t to know is how do you decide where you’d be in the lease lifecycle? ROE would presumably dip if you were at the start, but increase towards the end…?
I would think about the immediate effect. at the start, NI will increase. then drop. because the sum of Interest+depreciation is large at the start for the capital lease and it will drop as more principle is paid off.
jiao seems to be right…forgot that from LI.
If they go heavy on this GAAP vs. IAS/IFRS garbage, I’m doomed…