In theory, a change in accounting rules should not affect economic valuations, but Deloitte foresees that the new IFRS 16 on leases “will impact the outcomes of valuations and introduce new attention areas in business valuation and M&A transactions.” This is according to a publication by Deloitte’s office in The Netherlands that examines the new standard’s impact on the outcomes of valuations. The International Accounting Standards Board (IASB) issued IFRS 16 Leases in 2016 for financial periods beginning on or after Jan. 1, 2019.

Lessees will see increases in EBITDA as well as leased assets and financial liabilities on the balance sheet. For companies with material off-balance sheet lease commitments, they will see significant changes in key financial metrics such as leverage ratio, return on invested capital (ROIC), and valuation multiples. “Although equity values should not change, enterprise values of companies will increase,” the report says.