All investors use gearing as a factor in evaluating the quality of a stock. However in recent times and for some reason the accounting standards people have decreed that operating leases have to be capitalised and therefore are to be included in debt figures on the balance sheet. I have no intrinsic problem with this treatment, but when I look at the stock report for a company I sometimes have to pinch myself when looking at a high number - say over 60% - to remind myself that it is in some ways an artificial number.
Investors who use stock reports as gospel and who are not financially orientated can be easily put off by this, especially if it's say a retailer with lots of rental properties. . I know that I can find the "old" numbers on the balance sheet if I delve hard enough but should I have to?
I have therefore asked Stocko if we could get the old version of gearing shown somewhere on the stock report so as to level up the playing field between those stocks that have operating leases and those that don't. Ed in his reply to me quotes JD Sports Fashion (LON:JD.) who have long term debt of £55m but capital lease obligations of £2316m as at January 2022. Has he made my case for me?
What does the community think? Do I get any support for my idea?
