Introduction
The adoption of International Financial Reporting Standard 16 Leases, mandatory for annual periods beginning on or after 1 January 2019, constitutes one of the most consequential changes to financial reporting methodology introduced by the International Accounting Standards Board in the preceding decade. By requiring lessees to recognise substantially all lease obligations as right-of-use assets and corresponding financial liabilities on the face of the balance sheet, the standard fundamentally altered the manner in which entities that rely extensively on leased assets present their financial position to external stakeholders. For leasing companies listed on the Warsaw Stock Exchange, this transformation carries a distinctive analytical significance: these entities occupy a dual position in the leasing market, acting simultaneously as lessors — whose revenue-generating activities consist precisely in providing leased assets to third parties — and as lessees in respect of their own operational infrastructure, including office premises, vehicle fleets, and information technology equipment. The interaction between this dual exposure and the asymmetric treatment accorded to lessors and lessees under IFRS 16 generates a complex pattern of balance-sheet and ratio effects that is not fully captured by the existing international literature, the bulk of which focuses on non-financial lessees in the airline, retail, and transportation industries.
The present thesis addresses this gap by conducting a systematic empirical investigation of the financial statement effects of IFRS 16 adoption across a purposively selected sample of leasing companies listed on the Warsaw Stock Exchange. The central research problem is formulated as follows: to what extent, and through what specific mechanisms, did the mandatory implementation of IFRS 16 alter the reported financial position of Polish listed leasing companies, and what implications do these alterations carry for the accuracy and utility of conventional ratio-based financial analysis applied to entities in this sector? Subsidiary research questions are derived from this central problem. First, what are the theoretical and historical foundations of the balance-sheet recognition model introduced by IFRS 16, and in what respects does it depart from the classification-based approach of its predecessor, IAS 17 Accounting for Leases? Second, what is the institutional and regulatory context within which Polish listed leasing companies operate, and how did the transition process unfold within the specific features of the domestic market? Third, what quantifiable changes in selected financial ratios — including the debt-to-equity ratio, the return on assets, and the EBITDA margin — can be documented through comparative analysis of pre-adoption and post-adoption financial statements for the sampled entities?
The choice of the Polish leasing sector as the empirical focus of this study is justified on several grounds. Poland represents the largest leasing market among the Central and Eastern European economies that joined the European Union in 2004, with the aggregate value of new leasing contracts reaching several hundred billion Polish zlotys annually in the years immediately preceding and following the IFRS 16 transition. The Warsaw Stock Exchange hosts a small but analytically significant cohort of publicly listed leasing entities whose financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, provide a transparent and longitudinally consistent data source for the type of comparative analysis undertaken here. Furthermore, the Polish leasing market exhibits structural characteristics — including a high proportion of movable asset leasing, particularly motor vehicles and machinery, alongside a growing segment of real estate finance leasing — that may produce patterns of IFRS 16 impact distinct from those documented in markets dominated by long-duration operating leases of commercial property or aircraft. These considerations collectively position the Warsaw Stock Exchange-listed leasing sector as a valuable and underexamined subject for empirical accounting research.
The academic significance of the research topic extends beyond its empirical contribution to the literature on IFRS 16 adoption effects. From a theoretical perspective, the standard's implementation provides a natural experiment in which the consequences of a mandatory accounting policy change can be traced at the firm level, holding constant the underlying economic reality of the transactions being reported. This characteristic is of particular value in the context of financial ratio analysis, since any observed changes in leverage, profitability, or asset utilisation ratios following the transition date can, with appropriate methodological controls, be attributed to the accounting policy change rather than to genuine alterations in business operations or asset intensity. The question of whether conventional ratio-based analysis retains its interpretive validity in the post-IFRS 16 reporting environment is of direct relevance not only to academic researchers in financial accounting but also to financial analysts, credit rating practitioners, bank supervisors, and individual investors who rely on published financial statements as the primary source of information about the financial health of listed entities.
The thesis is structured across three substantive chapters, each addressing a distinct dimension of the research problem, followed by this introduction and a concluding chapter that synthesises the findings and articulates their implications. Chapter 1 establishes the theoretical foundations of the study by tracing the evolution of international lease accounting standards from the earliest systematic regulatory frameworks developed in the United States in the 1970s through the successive reform efforts of the International Accounting Standards Committee and the International Accounting Standards Board, culminating in the publication of IFRS 16 in January 2016. Particular attention is devoted to the conceptual arguments that motivated the abandonment of the operating-finance lease dichotomy that characterised IAS 17, the technical architecture of the recognition and measurement model introduced by IFRS 16, and the disclosure requirements that govern the presentation of lease-related information in post-adoption financial statements. Chapter 1 thus provides the normative and conceptual reference point against which the empirical observations in Chapter 3 are interpreted.
Chapter 2 situates the empirical analysis within its institutional and market context by examining the structure, development, and regulatory environment of the Polish leasing sector. Beginning with the emergence of leasing as a financing instrument in the post-transformation economy of the 1990s, the chapter traces the growth of the market through successive phases of legislative codification, tax regime evolution, and European Union regulatory harmonisation, arriving at the contemporary landscape in which leasing constitutes an established and economically significant component of corporate asset financing in Poland. The chapter then examines the specific entities listed on the Warsaw Stock Exchange that constitute or have constituted the publicly traded segment of the Polish leasing industry, with reference to their business models, asset portfolios, and financial reporting practices. The chapter also analyses the mechanics of the IFRS 16 transition process as it applied to Polish listed entities, including the choice of transition method, the quantification of transition adjustments disclosed in the opening balance sheets of 2019 financial statements, and the communications strategies adopted by management teams in conveying the accounting changes to capital market participants.
Chapter 3 presents the empirical core of the thesis through a quantitative comparative case-study analysis of the balance-sheet and ratio effects of IFRS 16 adoption across the sample of Warsaw Stock Exchange-listed leasing companies. The methodology employed involves the systematic extraction and comparison of selected financial statement items and derived ratios from audited annual reports for the financial years 2017 and 2018 — representing the pre-adoption reference period — and the financial years 2019 and 2020, representing the post-adoption period. The ratios examined include total asset turnover, the debt-to-equity ratio, the interest coverage ratio, the return on assets, and the EBITDA margin, each of which is predicted by the theoretical framework to respond in a specific and directionally consistent manner to the balance-sheet enlargement and income statement reclassifications introduced by the standard. The analysis proceeds entity by entity before aggregating findings to identify patterns common to the sector as a whole, with deviations from the common pattern attributed to entity-specific differences in the scale and composition of operating lease portfolios.
The research methodology relies exclusively on publicly available data sources, specifically the audited consolidated financial statements of the sampled entities filed with the Warsaw Stock Exchange and published in accordance with the requirements of the Act on Public Offering and the Regulation on transparency requirements for issuers of securities. This choice of data source reflects both the constraints of a bachelor's thesis research project, in which access to proprietary management information is not available, and the principle that the effects of IFRS 16 that are of greatest relevance to external stakeholders are precisely those visible in published financial statements rather than in internal management accounts. The comparative methodology, which treats the transition from pre-adoption to post-adoption financial statements as a controlled analytical event, is validated by its extensive use in the prior international literature on accounting standard adoption effects.
The scope of the study is delimited in several respects that should be acknowledged at the outset. The sample is restricted to entities classified as leasing companies whose primary business activity consists in providing lease finance to third parties; entities for which leasing constitutes only a minor operational component are excluded. The temporal scope of the empirical analysis is bounded by the availability of comparable financial data and by the decision to examine a two-year pre-adoption window and a two-year post-adoption window, which is considered sufficient to capture the initial transition effect while avoiding contamination from subsequent period-specific developments unrelated to the standard change. The study does not address the tax accounting or managerial decision-making dimensions of IFRS 16 adoption, which, while academically significant, lie beyond the boundaries of a financial reporting-focused analysis. These delimitations are regarded as appropriate to the scope and purpose of a bachelor's thesis and do not diminish the validity of the conclusions that can be drawn within the defined research perimeter.
The thesis makes a contribution to the academic literature on IFRS 16 adoption effects by providing systematic empirical evidence from a Central European market that has received comparatively limited attention in English-language accounting research, and by focusing on the leasing sector specifically rather than on cross-industry samples in which lease-intensive entities may be statistically underrepresented. The findings are of practical relevance to financial analysts and institutional investors operating in Polish capital markets, to banking sector supervisors who rely on ratio-based assessments of financial institution soundness, and to the companies themselves in the context of covenant management and investor relations. It is hoped that the research presented in this thesis will stimulate further comparative inquiry into the sector-specific effects of IFRS 16 adoption across the diverse market environments of the European Union.
Chapter 1: Theoretical Foundations of Lease Accounting and the IFRS 16 Standard
1.1. The Evolution of International Lease Accounting Standards
The history of lease accounting is characterised by a prolonged tension between the economic substance of leasing transactions and their formal legal classification, a tension that standard-setters across multiple jurisdictions sought to resolve through successive waves of regulatory reform spanning more than four decades. The earliest systematic attempts to address leasing in financial reporting emerged in the United States during the 1970s, when the rapid expansion of commercial leasing markets rendered the then-prevailing practice of off-balance-sheet treatment for lease obligations increasingly untenable from the perspective of financial statement users. In 1976, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 13 (Accounting for Leases), which introduced a bifurcated classification model distinguishing capital leases — those that transferred substantially all the risks and rewards of ownership to the lessee — from operating leases, which remained entirely off the lessee's balance sheet [22]. This distinction, operationalised through a set of quantitative thresholds including the requirement that the present value of minimum lease payments equal or exceed ninety per cent of the fair value of the leased asset or that the lease term extend to seventy-five per cent or more of the asset's estimated economic life, established the conceptual template that would subsequently influence standard-setting at the international level.
At the international level, the International Accounting Standards Committee issued IAS 17 Accounting for Leases in September 1982, adopting a broadly analogous dual-classification framework. Under the initial formulation of IAS 17, a finance lease was defined as one that transferred substantially all the risks and rewards incidental to ownership of an asset, while all other leases were classified as operating leases [1]. The standard was substantially revised in December 1997 and again in December 2003, when the newly constituted International Accounting Standards Board undertook a programme of technical improvements to existing standards. The 2003 revision refined the indicators used to determine whether substantially all risks and rewards had been transferred, enumerating five primary indicators — including situations where ownership transferred at the end of the lease term, where the lessee had a bargain purchase option, where the lease term covered the major part of the asset's economic life, where the present value of minimum lease payments amounted to at least substantially all of the fair value of the leased asset, and where the leased assets were of such a specialised nature that only the lessee could use them without major modifications — alongside three secondary indicators [2]. However, the structural architecture of IAS 17 remained unchanged: the classification of a lease as finance or operating continued to determine whether the lessee recognised any assets or liabilities in its statement of financial position.
The conceptual weaknesses of IAS 17's dual-classification model attracted sustained criticism from financial analysts, investors, and regulators throughout the late 1990s and early 2000s. The central objection was that the finance/operating dichotomy created systematic incentives for preparers to structure lease contracts so as to fall marginally below the classification thresholds, thereby maintaining significant contractual obligations entirely off the balance sheet [4]. The economic effect of such arrangements — the lessee's commitment to make future payments for the right to use productive assets — was identical regardless of whether the lease was classified as finance or operating, yet the accounting treatment diverged dramatically. Under IAS 17, the operating lessee recognised only a periodic lease expense, typically on a straight-line basis, with no corresponding asset or liability, while the finance lessee recognised both a right-of-use asset and a corresponding liability at commencement of the lease [2]. This asymmetry in accounting treatment, driven by a classification boundary that could be manipulated through contract engineering, undermined the comparability of financial statements across entities and industries.
The quantitative significance of off-balance-sheet lease financing became particularly salient following a 2005 report by the United States Securities and Exchange Commission, which estimated that US public companies alone may have held approximately USD 1.25 trillion in operating lease commitments that were not reflected on their balance sheets [4]. Academic research published contemporaneously confirmed that financial analysts routinely capitalised operating lease obligations when constructing adjusted leverage ratios, suggesting that the market recognised the economic substance of these arrangements even when accounting standards did not require on-balance-sheet recognition [25]. The absence of operating lease liabilities from balance sheets was therefore not merely a technical accounting matter but a systemic transparency deficit that distorted comparisons between entities that owned assets outright, entities that financed asset acquisition through borrowing, and entities that leased assets through operating arrangements — three economically distinct but functionally similar strategies for gaining access to productive resources.
The response from the international standard-setting community took the form of a joint convergence project undertaken by the IASB and the FASB, formally initiated as part of the Memorandum of Understanding reached at Norwalk, Connecticut in 2002 and accelerated in the aftermath of the 2007–2009 global financial crisis, during which off-balance-sheet exposures became a central regulatory concern. A Discussion Paper on lease accounting was published jointly in March 2009, followed by an Exposure Draft in August 2010 and a revised Exposure Draft in May 2013 [1]. The consultation process generated extensive stakeholder feedback, with preparers and lessees raising concerns about the cost and complexity of implementation, while analysts and investors broadly supported the principle of balance sheet recognition. Significant conceptual debates arose regarding the treatment of contingent and variable rentals, the definition of the lease term where extension options existed, and whether a single-model approach for lessees — treating all leases as giving rise to assets and liabilities — should distinguish between leases that were more akin to finance arrangements and those that were more akin to service contracts, particularly for short-term leases of assets that rapidly depreciated in value [4].
The eventual outcome of this extended deliberative process was the issuance by the IASB of IFRS 16 Leases in January 2016, with a mandatory effective date of 1 January 2019, subject to earlier application provided that IFRS 15 Revenue from Contracts with Customers was also applied [1]. Simultaneously, the FASB issued Accounting Standards Codification Topic 842 Leases, effective for public business entities for annual periods beginning after 15 December 2018. While the two standards converged substantially on lessee accounting — both requiring balance sheet recognition of lease assets and liabilities for virtually all leases — they diverged on the income statement treatment for what had previously been operating leases: IFRS 16 adopted a single financing model, replacing the straight-line operating lease expense with depreciation and interest, while ASC 842 retained a modified straight-line expense profile for certain leases [4]. For lessors, both standards substantially carried forward the IAS 17 and Topic 840 classification approaches, a decision that attracted some criticism from commentators who argued that the symmetry of lessor and lessee accounting had not been adequately addressed [2]. The issuance of IFRS 16 thus represented the culmination of a decade-long reform effort and a fundamental reorientation of the conceptual basis for lease accounting, establishing the theoretical framework within which the empirical analysis of this thesis is situated.
1.2. Core Principles and Scope of IFRS 16
The stated objective of IFRS 16 is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents lease transactions and that gives users of financial statements a basis for assessing the effect that leases have on the financial position, financial performance, and cash flows of an entity [2]. This objective is directly derived from the qualitative characteristics of useful financial information articulated in the IASB's Conceptual Framework for Financial Reporting, which identifies relevance and faithful representation as the two fundamental qualitative characteristics [24]. The pursuit of this objective led the IASB to adopt, for lessees, a single-model approach that abolishes the operating/finance lease distinction and requires the recognition of a right-of-use asset and a corresponding lease liability for substantially all lease arrangements, subject to two defined categories of exemptions.
The foundation of the IFRS 16 lessee model rests upon the definition of a lease, which the standard articulates as a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration [2]. This definition requires the satisfaction of three cumulative conditions: first, the existence of an identified asset — one that is specified explicitly or implicitly in the contract and that cannot be substituted by the supplier throughout the period of use; second, the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use; and third, the right to direct how and for what purpose the identified asset is used throughout the period of use [2]. The third condition constitutes the principal definitional innovation relative to the IAS 17 and IFRIC 4 frameworks, introducing the concept of control as the determinative criterion. Under IAS 17, the classification analysis focused on whether risks and rewards had been transferred; under IFRS 16, the identification analysis focuses on whether the customer has the right to direct the use of an asset, a conceptual shift that aligns lease accounting more closely with the asset recognition criteria in the Conceptual Framework [1].
The treatment of substitution rights deserves particular attention, as it has practical significance for lessors operating in industries where asset substitution is commercially common. IFRS 16 provides that an identified asset exists even if the supplier has the practical ability to substitute the asset only if the supplier's right to substitute is substantive — meaning the supplier has both the practical ability to substitute the asset and would benefit economically from doing so [2]. Where a supplier has no substantive substitution right, or where the supplier's substitution right exists for maintenance purposes only, the asset is identified and the contract may constitute a lease. This refinement addresses a gap in IFRIC 4, under which arrangements involving non-specific assets were frequently structured to avoid classification as leases by incorporating supplier substitution rights of questionable economic substance [3].
Having established the definition of a lease, IFRS 16 provides two exemptions under which lessees may elect not to recognise right-of-use assets and lease liabilities, instead treating lease payments as expenses on a straight-line basis or another systematic basis over the lease term [2]. The first exemption applies to short-term leases, defined as leases that, at the commencement date, have a lease term of twelve months or less, including any extension options that the lessee is reasonably certain to exercise. This exemption must be applied by class of underlying asset and is not available where a lease contains a purchase option [2]. The second exemption applies to leases for which the underlying asset is of low value when new, a threshold that the IASB indicated in its Basis for Conclusions as approximately USD 5,000 [4]. Unlike the short-term lease exemption, the low-value asset exemption may be applied on a lease-by-lease basis irrespective of whether the aggregate of such leases is material to the reporting entity. The rationale offered by the IASB for these exemptions was cost-benefit: the information benefits of capitalising large numbers of individually insignificant lease contracts would not justify the implementation and ongoing compliance costs [4]. For entities in the leasing sector, the significance of these exemptions relates primarily to their role as lessees of administrative and operational assets rather than as providers of the leasing product itself.
For lessors, IFRS 16 substantially retains the dual-classification model inherited from IAS 17. A lessor classifies each of its leases as either a finance lease or an operating lease, applying the same conceptual framework as under IAS 17: a finance lease is one that transfers substantially all the risks and rewards incidental to ownership of an underlying asset, while an operating lease is any lease that does not meet this criterion [2]. The standard enumerates indicators of finance lease classification that are virtually identical to those in IAS 17 — including transfer of ownership at the end of the lease term, bargain purchase options, lease terms covering the major part of the economic life of the asset, and present values of minimum lease payments amounting to substantially all of the fair value of the asset. The asymmetry between lessee and lessor accounting under IFRS 16 — whereby all lessees apply a single on-balance-sheet model while lessors retain a dual classification — has been a source of academic commentary and was noted in the IASB's own effects analysis as a deliberate policy choice reflecting the view that the primary transparency deficit lay in lessee reporting rather than lessor reporting [4].
The scope of IFRS 16 extends to all leases of right-of-use assets in a sublease, but excludes several defined categories of arrangements: leases to explore for or use minerals, oil, natural gas, and similar non-regenerative resources; leases of biological assets within the scope of IAS 41; service concession arrangements within the scope of IFRIC 12; licences of intellectual property granted by a lessor within the scope of IFRS 15; and rights held by a lessee under licensing agreements for items such as films, patents, and copyrights within the scope of IAS 38 [2]. These exclusions reflect the IASB's assessment that the particular characteristics of these arrangements — including the regulatory frameworks governing service concessions and the consumption-of-benefit patterns associated with intellectual property licences — warranted treatment under specialised standards rather than the general lease model. The scope of IFRS 16 is thus broad but not unlimited, and entities in the leasing sector must carefully evaluate whether arrangements involving non-physical or intangible underlying assets fall within its ambit.
The transition provisions of IFRS 16, set out in Appendix C to the standard, offer entities significant choices that materially affect the financial statements in the period of adoption. Entities may apply either the full retrospective approach, under which comparative periods are restated as if IFRS 16 had always been applied, or the modified retrospective approach, under which the cumulative effect of adoption is recognised as an adjustment to retained earnings at the beginning of the first year of application without restating comparatives [3]. Research by the Australian and Malaysian accounting standards boards found that the majority of entities that adopted IFRS 16 selected the modified retrospective approach, principally because it avoided the cost and complexity of restating prior-period comparative information [6]. Under the modified retrospective approach, further practical expedients are available, including the option to measure the right-of-use asset at an amount equal to the lease liability adjusted for prepayments or accruals, the option to apply a single discount rate to a portfolio of leases with reasonably similar characteristics, and the option to rely on a previous assessment of whether a contract contains a lease under IAS 17 and IFRIC 4 rather than reassessing all contracts using the new definition [3]. These choices, individually and in combination, can produce materially different balance sheet outcomes at the transition date and consequently affect the comparability of financial ratios across entities that adopted IFRS 16 simultaneously but selected different transition options.
1.3. Recognition and Measurement of Right-of-Use Assets and Lease Liabilities
The accounting mechanics of IFRS 16 for lessees represent the technical core of the standard's transformative effect on financial statements, and a thorough understanding of the recognition and measurement requirements is essential for interpreting the empirical results presented in Chapter 3 of this thesis. The recognition event under IFRS 16 is the commencement date — the date on which a lessor makes an underlying asset available for use by the lessee — at which point the lessee simultaneously recognises a right-of-use asset and a corresponding lease liability [2]. This bilateral recognition has immediate and significant consequences for the statement of financial position: total assets increase by the carrying amount of the right-of-use asset and total financial liabilities increase by the carrying amount of the lease liability, in each case reflecting obligations and entitlements that under IAS 17 operating lease accounting would have been entirely absent from the balance sheet.
The initial measurement of the lease liability is determined as the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease if that rate can be readily determined, or otherwise using the lessee's incremental borrowing rate [2]. The rate implicit in the lease is defined as the rate that causes the present value of the lease payments and the unguaranteed residual value to equal the sum of the fair value of the underlying asset and any initial direct costs of the lessor. For many lessees — and in particular for entities that are lessees rather than lessors in the transaction — the implicit rate cannot be readily determined, as it requires knowledge of the asset's fair value and the unguaranteed residual value assumed by the lessor, information that is typically not available to the lessee [5]. Accordingly, the lessee's incremental borrowing rate is used in practice by the majority of entities adopting IFRS 16, defined as the rate of interest that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The determination of this rate involves considerable judgement and has been identified in post-implementation research as one of the most challenging aspects of IFRS 16 adoption [6].
The components of lease payments included in the initial measurement of the lease liability are enumerated exhaustively in IFRS 16 paragraph 26 and comprise the following categories:
- Fixed payments, including in-substance fixed payments (payments that may appear to contain variability but that in practice the lessee has no realistic alternative to making), net of any lease incentives receivable from the lessor;
- Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; common examples include payments linked to a consumer price index or a benchmark interest rate such as EURIBOR;
- Amounts expected to be payable by the lessee under residual value guarantees, representing the lessee's estimate of the portion of any shortfall in the residual value of the underlying asset at the end of the lease that it is obligated to make good;
- The exercise price of a purchase option, if the lessee is reasonably certain to exercise that option at the commencement date;
- Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising a termination option.
Variable lease payments that are not linked to an index or rate but instead depend on usage, performance, or other contingent factors are excluded from the lease liability measurement and are recognised in profit or loss in the period in which the event or condition that triggers the payment occurs [2]. This exclusion reflects the IASB's view that such payments do not represent a present obligation at the commencement date, as the amount to be paid is genuinely uncertain and contingent on future events within the lessee's control. The distinction between in-substance fixed payments and genuinely variable payments requires judgement and has been a source of application diversity in practice.
The determination of the lease term is a related area of significant judgement. IFRS 16 defines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option [2]. The concept of "reasonably certain" is assessed by reference to all relevant facts and circumstances that create an economic incentive for the lessee to exercise or not to exercise the option, including the contractual terms and conditions relative to market rates, significant leasehold improvements, the importance of the underlying asset to the lessee's operations, and the costs associated with termination and relocation. For leasing companies listed on the Warsaw Stock Exchange, which typically maintain portfolios of leased assets including vehicles, machinery, and real estate with varying contractual and optioned terms, the assessment of reasonably certain extension represents a material judgement that can substantially affect the magnitude of recognised lease liabilities [3].
The initial measurement of the right-of-use asset comprises four elements: the initial measurement of the lease liability; lease payments made at or before the commencement date, less any lease incentives received; initial direct costs incurred by the lessee that are incremental to obtaining the lease; and an estimate of costs to dismantle and restore the underlying asset or the site on which it is located, where such an obligation arises [2]. The resulting right-of-use asset therefore typically exceeds the lease liability at commencement by the amount of initial direct costs and any prepaid lease payments, and is further adjusted for any dismantlement provisions. Subsequent to initial recognition, the right-of-use asset is measured under the cost model unless the entity applies the revaluation model of IAS 16 to that class of property, plant and equipment or accounts for the asset as investment property under IAS 40 [2]. Under the cost model, the right-of-use asset is depreciated on a straight-line basis over the shorter of the asset's useful life and the lease term, with modifications where the lease is reasonably certain to end with a transfer of ownership or where the lessee has a purchase option that is reasonably certain to be exercised, in which case depreciation is calculated over the useful life of the underlying asset [2]. The right-of-use asset is also subject to impairment testing under IAS 36 at the same frequency as other non-financial assets.
Subsequent measurement of the lease liability follows the effective interest method, with the carrying amount increased to reflect interest accruing at the discount rate determined at commencement, and reduced to reflect lease payments made during the reporting period [2]. The total carrying amount of the lease liability therefore decreases over time as principal repayments are made, but the interest charge diminishes in absolute terms as the liability reduces, producing the characteristic front-loading of total expense in the early periods of the lease. This pattern arises because, in the initial periods, interest represents a relatively large proportion of each payment while depreciation of the right-of-use asset is spread evenly over the lease term: the combined depreciation and interest charge therefore exceeds the equivalent straight-line operating lease rental in early periods but falls below it in later periods [4]. For an entity maintaining a stable portfolio of leases starting in different periods, the aggregate income statement effect of the transition from IAS 17 operating lease accounting to IFRS 16 may be modest, as the front-loaded charges on newer leases are offset by the tail-end profile of older leases. The balance sheet effect, however, is cumulative and persistent: all leases in the portfolio that are above the exemption thresholds contribute to the stock of right-of-use assets and lease liabilities, regardless of their stage of maturity.
Remeasurement of the lease liability is required when certain specified events occur: when the lessee reassesses whether it is reasonably certain to exercise a purchase or extension option or not to exercise a termination option; when a contingency is resolved such that lease payments become or cease to be in-substance fixed; when there is a change in amounts expected to be payable under a residual value guarantee; or when there is a change in the index or rate used to determine lease payments [2]. A remeasurement of the lease liability results in a corresponding adjustment to the carrying amount of the right-of-use asset, with the exception of situations where the carrying amount of the right-of-use asset has already been reduced to zero, in which case any further reduction in the lease liability is recognised in profit or loss. Lease modifications — changes in the scope or consideration of a lease that were not part of the original terms and conditions — may also give rise to a remeasurement of both the right-of-use asset and the lease liability, or, where the modification grants the lessee an additional right of use of an asset not included in the original lease at a price commensurate with its stand-alone price, may be accounted for as a separate new lease [2].
The following table summarises the key initial and subsequent measurement requirements for right-of-use assets and lease liabilities under IFRS 16, contrasting the treatment with the corresponding IAS 17 operating lease accounting:
| Accounting Element | IAS 17 — Operating Lease | IFRS 16 — All Leases (excl. exemptions) |
|---|---|---|
| Initial recognition | No asset or liability recognised at commencement | Right-of-use asset and lease liability recognised at commencement date [2] |
| Measurement of asset | Not applicable | Lease liability + prepaid payments + initial direct costs + dismantlement provision [2] |
| Measurement of liability | Not applicable | Present value of future lease payments at implicit rate or IBR [2] |
| Subsequent depreciation | Not applicable | Straight-line over shorter of useful life and lease term; subject to IAS 36 impairment [2] |
| Income statement expense | Straight-line lease rental (operating expense) [4] | Depreciation (operating) + interest on liability (finance costs) [4] |
| EBITDA impact | Lease expense reduces EBITDA [4] | Depreciation and interest below EBITDA; EBITDA increases versus IAS 17 [4] |
| Off-balance-sheet disclosure | Future minimum lease payments in three maturity bands [5] | Maturity analysis on undiscounted basis per IFRS 7 [5] |
| Variable payments on index/rate | Expensed as incurred [4] | Included in lease liability at commencement; remeasured at each index/rate change [2] |
The income statement consequences of the transition from IAS 17 to IFRS 16 for former operating lessees deserve further elaboration, as they are directly relevant to the key financial ratios examined in Chapter 3. Under IAS 17, the operating lease expense was classified within operating costs, reducing earnings before interest, tax, depreciation, and amortisation. Under IFRS 16, the corresponding charges are depreciation of the right-of-use asset — still within operating costs and therefore still reducing EBITDA — and interest expense on the lease liability — classified within finance costs and therefore below the EBIT line [4]. The net effect is that EBITDA increases when transitioning from IAS 17 to IFRS 16, as the full operating lease rental charge, which previously reduced EBITDA, is replaced by depreciation (which reduces EBITDA by the same annual amount as the lease term progresses uniformly) and interest (which does not reduce EBITDA). For companies with substantial portfolios of former operating leases, the increase in EBITDA following IFRS 16 adoption can be material, and the operating profit margin as reported under IFRS 16 may differ markedly from the pre-adoption figure, not because of any change in underlying commercial performance but solely as a consequence of the reclassification of expenses between categories [4]. This observation is of considerable practical importance for analysts and investors comparing financial performance across reporting periods that straddle the IFRS 16 adoption date.
1.4. Disclosure Requirements and Their Implications for Transparency
The disclosure framework established by IFRS 16 represents a substantial expansion of the information that lessees are required to provide in their financial statements relative to the requirements of IAS 17, and reflects the IASB's judgment that enhanced transparency regarding lease-related assets, liabilities, expenses, and cash flows is necessary for users of financial statements to make well-informed economic decisions [5]. The disclosure objective stated in IFRS 16 paragraph 51 is for lessees to disclose information in the notes to the financial statements that gives users of financial statements a basis to assess the effect that leases have on the financial position, financial performance, and cash flows of the lessee. To achieve this objective, the standard establishes both quantitative disclosure requirements specifying particular items of information and a qualitative disclosure requirement to provide any additional information necessary to meet the stated objective [5].
The quantitative disclosures required of lessees under IFRS 16 encompass a range of balance sheet, income statement, and cash flow items that together enable users to reconstruct the essential features of the entity's lease portfolio. These requirements are codified in paragraphs 53 through 58 of the standard and include the following specific items: depreciation charges for right-of-use assets disaggregated by class of underlying asset; interest expense on lease liabilities; expense relating to short-term leases for which the short-term lease recognition exemption has been applied; expense relating to leases of low-value assets for which the low-value asset recognition exemption has been applied; expense relating to variable lease payments not included in the measurement of lease liabilities; income from subleasing right-of-use assets; total cash outflow for leases; additions to right-of-use assets; gains or losses arising from sale and leaseback transactions; and the carrying amount of right-of-use assets at the end of the reporting period disaggregated by class of underlying asset [2]. The maturity analysis required under IFRS 16 paragraph 58 must present undiscounted lease payments, reconciled to the present value of lease liabilities disclosed in the statement of financial position, in maturity bands consistent with those used for other financial liabilities under IFRS 7 [5].
The qualitative disclosures required by IFRS 16 complement the quantitative information by providing contextual explanation of the lessee's leasing activities and the significant judgements involved in applying the standard. Paragraph 59 of IFRS 16 identifies the categories of additional information that entities should consider disclosing to meet the overall disclosure objective, including: the nature of the lessee's leasing activities; future cash outflows to which the lessee is potentially exposed that are not reflected in the measurement of lease liabilities, including exposure arising from variable lease payments, extension and termination options, and residual value guarantees; restrictions or covenants imposed by leases; and sale and leaseback transactions [2]. The basis on which variable lease payments are determined must also be disclosed, as this enables users to assess the sensitivity of reported lease liabilities to changes in the relevant indices, rates, or usage levels. For leasing companies listed on the Warsaw Stock Exchange, many of which enter into both operating and finance lease arrangements as lessors while simultaneously holding leases as lessees for their own operational requirements — including office premises, IT equipment, and vehicle fleets — the qualitative disclosures provide users with important context for interpreting the quantitative data [5].
A comparison of the disclosure requirements under IAS 17 and IFRS 16 reveals the extent to which the new standard enhances the informational content of financial statements. Under IAS 17, the primary operating lease disclosures required of lessees were the total future minimum lease payments under non-cancellable operating leases, disaggregated into amounts due within one year, between one and five years, and beyond five years, together with a general description of significant leasing arrangements [23]. While these disclosures provided analysts with a basis for constructing capitalised lease estimates, they were widely criticised as insufficient: the minimum payment bands were too broad to permit precise present value calculations, the definition of "non-cancellable" excluded arrangements with nominal cancellation rights that were economically equivalent to firm commitments, and the disclosures provided no information about variable or contingent elements of lease payments [5]. The IFRS 16 regime addresses each of these deficiencies: the maturity analysis uses undiscounted contractual cash flows and is reconciled to the recognised liability, thereby providing both a measure of total contractual exposure and a reconciliation to the balance sheet; variable payments and extension option exposure are separately disclosed; and the recognised ROU asset provides a corresponding balance for the capitalised lease obligation [5].
The implications of enhanced lease disclosures for the transparency and decision-usefulness of financial statements have been examined from multiple analytical perspectives. From the perspective of equity investors, the capitalisation of operating leases under IFRS 16 improves comparability between entities that previously disclosed similar commercial arrangements under materially different accounting treatments, depending on whether their leases happened to cross the IAS 17 classification boundary [4]. The recognition of lease liabilities also aligns the reported leverage of lessees more closely with the economic leverage that analysts had previously estimated through capitalisation adjustments, reducing the information asymmetry between sophisticated institutional investors capable of making such adjustments and less sophisticated retail investors who relied on unadjusted financial statement data [26]. From the perspective of credit analysts, the explicit maturity analysis of lease liabilities under IFRS 16 provides a more reliable basis for assessing debt capacity and coverage ratios, as the entire contractual stream of lease payments — rather than only the minimum payments under non-cancellable arrangements — is presented in a standardised format with direct reconciliation to the recognised balance sheet item [5].
Post-implementation research conducted by the AASB and MASB in Australia and Malaysia, based on review of financial statements and interviews with preparers, auditors, and users, identified several areas of application diversity and disclosure quality concern in the initial years following IFRS 16 adoption [6]. Preparers were found to have used boilerplate language in qualitative disclosures concerning the determination of the incremental borrowing rate and the assessment of extension option certainty, providing limited entity-specific information that would allow users to assess the sensitivity of reported figures to the underlying assumptions [6]. The practical expedients available on transition — particularly the use of portfolio discount rates and the modified retrospective method — were widely adopted, but their implications for the comparability of reported figures across entities adopting IFRS 16 on the same date were not always clearly communicated to users [3]. The research also highlighted divergence in the classification and presentation of right-of-use assets within the statement of financial position, with some entities presenting ROU assets separately while others included them within the line items where the corresponding owned assets would be presented, an option explicitly permitted by IFRS 16 paragraph 47 but one that reduces the visibility of lease-related assets to users scanning primary financial statement line items [5].
The disclosure requirements of IFRS 16 also have direct implications for the assessment of financial position and creditworthiness in the context of loan covenants and other contractual arrangements that incorporate financial ratios as triggers or conditions. Because the adoption of IFRS 16 simultaneously increases reported total assets (through the addition of right-of-use assets) and total financial liabilities (through the recognition of lease liabilities), ratios such as the debt-to-equity ratio, net debt to EBITDA, and leverage coverage ratios are mechanically affected even in the absence of any change in the entity's underlying commercial activities or economic obligations [4]. Entities subject to financial covenant tests expressed in terms of these ratios were required, upon adoption of IFRS 16, to renegotiate covenant thresholds or obtain waivers from lenders, introducing transitional frictions and, in some cases, affecting the cost of borrowing [27]. The IASB anticipated this effect and expressed the view in its effects analysis that any changes to the cost of borrowing following IFRS 16 implementation would result from improved decision-making by lenders consequent upon improved transparency, rather than from a change in the borrower's underlying economic position [4].
The aggregate effect of the IFRS 16 disclosure regime on the information environment of capital markets is difficult to assess empirically, as the post-adoption period has coincided with other significant developments in financial reporting and macro-economic conditions. However, the theoretical case for enhanced transparency is compelling: by requiring the on-balance-sheet recognition of substantially all lease obligations and the provision of detailed quantitative and qualitative information about the nature, terms, and measurement of those obligations, IFRS 16 addresses the fundamental criticism that had been levelled at IAS 17 for more than two decades — namely, that it permitted the concealment of substantial economic liabilities in the footnotes of financial statements rather than requiring their transparent presentation on the face of the balance sheet [4]. For leasing companies listed on the Warsaw Stock Exchange, which as professional providers of leasing finance are inherently and extensively engaged in lease transactions, the disclosure requirements of IFRS 16 create an enhanced information set that stakeholders — including equity investors, debt providers, and regulatory supervisors — can use to assess the financial position, performance, and prospects of these entities. The empirical analysis in Chapter 3 draws on this enhanced information set to quantify the balance sheet and ratio effects of IFRS 16 adoption, building directly on the theoretical framework established in this chapter regarding the recognition, measurement, and disclosure requirements that govern the preparation of post-adoption financial statements by Polish listed leasing companies.
I'll write the full Chapter 2 content in formal academic HTML, drawing on the available source material.Chapter 2: The Leasing Sector in Poland and Its Presence on the Warsaw Stock Exchange
2.1. Structure and Development of the Polish Leasing Market
The emergence of the leasing industry in Poland is inseparable from the broader process of economic transformation initiated in 1989, when the liberalisation of capital markets and the rapid privatisation of state-owned enterprises created conditions under which private firms required access to asset-based financing that could not yet be adequately supplied by the nascent banking sector. In the early post-transformation years, leasing fulfilled the role of a pragmatic alternative to secured bank credit, enabling newly established commercial entities to acquire productive assets — notably motor vehicles, machinery, and office equipment — without the collateral requirements and lengthy credit assessment procedures that characterised the early Polish banking market [13]. The legal framework for leasing contracts remained, until the amendment of the Civil Code that entered into force in 2001, derived from general contractual provisions rather than a dedicated statutory regime, a circumstance that created uncertainty regarding the enforceability and tax treatment of lease agreements and constrained the pace of early market development [28].
The formalisation of leasing as a nominate contract under Polish civil law, achieved through the introduction of Articles 7091 to 70918 of the Civil Code by the Act of 26 July 2000, provided a foundation for accelerated market growth throughout the first decade of the twenty-first century. Poland's accession to the European Union in May 2004 constituted a second decisive inflection point, as the harmonisation of commercial law and accounting standards with European practice, the influx of foreign direct investment, and the deepening integration of Polish firms into international supply chains generated substantial demand for asset financing across multiple sectors of the economy [13]. The Polish Leasing Association (Związek Polskiego Leasingu, ZPL), which serves as the principal industry organisation and data aggregator, recorded consistent growth in the annual value of new leasing agreements throughout the pre-crisis period of 2004 to 2007, followed by a brief contraction during the global financial crisis of 2008 to 2009, and a sustained recovery trajectory thereafter [7].
In terms of aggregate market scale, the Polish leasing sector has grown to represent one of the larger leasing markets in Central and Eastern Europe. Data published by the Narodowy Bank Polski (NBP) confirm that between 2018 and 2022, the total assets of leasing companies operating in Poland increased by approximately 24 per cent in nominal terms, a rate of expansion that compared favourably with that of other non-bank financial intermediaries during the same period, including insurance companies and pension funds, whose aggregate assets declined in nominal terms [13]. By the end of 2022, leasing companies accounted for approximately 4.9 per cent of total Polish financial system assets, positioned after banks, investment funds, and insurance corporations in the hierarchy of financial intermediaries [13]. The value of outstanding leasing receivables, representing the stock of financing extended through lease arrangements that remained active at the balance sheet date, reached several hundred billion Polish zlotys, reflecting the cumulative effect of annual origination volumes that had consistently exceeded PLN 70 billion in new agreements per year in the post-2015 period [7].
The structure of the Polish leasing market by asset category has been characterised by a persistent dominance of movable assets (ruchomości) over immovable assets (nieruchomości). Motor vehicles — encompassing both passenger cars and light commercial vehicles — have consistently constituted the largest single category by both number of contracts and aggregate financing value, accounting for approximately 55 to 65 per cent of total new leasing volume in recent years [7]. This dominance reflects the favourable fiscal treatment accorded to vehicle leasing under Polish tax law, which is examined in greater detail in the following subchapter, as well as the extensive use of operating lease arrangements by enterprises seeking to manage vehicle fleets without the capital expenditure implications of outright purchase. Machinery and industrial equipment represents the second-largest category, encompassing a diverse range of assets from agricultural equipment and construction machinery to manufacturing plant and logistics infrastructure. The table below summarises the principal asset categories in the Polish leasing market and their estimated relative shares in the period immediately preceding the mandatory adoption of IFRS 16.
| Asset Category | Share of New Agreements by Value (%) | Predominant Lease Type Under IAS 17 | Relevance to IFRS 16 Transition |
|---|---|---|---|
| Passenger vehicles and light commercial vehicles | ~55–60% | Operating lease (majority) | High — significant off-balance-sheet exposure for lessees |
| Machinery and industrial equipment | ~20–25% | Mixed (operating and finance) | Medium — depends on contract term and asset life |
| Heavy transport and commercial vehicles | ~8–12% | Finance lease (majority) | Lower — already on-balance-sheet under IAS 17 |
| IT equipment and technology assets | ~3–5% | Operating lease (majority) | Medium — offset partly by low-value asset exemption |
| Real estate and immovable assets | ~3–5% | Finance lease (majority) | Lower — already recognised on balance sheets of lessees |
The role of leasing as a source of corporate financing in Poland must be understood within the context of the country's broader financial system, which has historically been dominated by the banking sector. At the end of 2022, banking sector assets represented approximately 73 per cent of total Polish financial system assets, a share that substantially exceeds the European Union average and reflects the underdevelopment of capital markets as a financing channel relative to Western European comparators [13]. The ratio of total financial system assets to gross domestic product in Poland stood at 117 per cent in 2022, substantially below the euro area average of 515.6 per cent, and also below the ratios observed in Hungary, Slovakia, and Czechia, indicating that Poland operates with a relatively low to medium level of financial intermediation [13]. Within this context, leasing represents one of the more dynamic segments of non-bank financing, serving as an important complement to bank credit particularly for small and medium-sized enterprises (SMEs) that may face collateral constraints in accessing traditional secured lending.
In comparative European perspective, the Polish leasing market occupies a significant position within the landscape of Central and Eastern European financial systems, while remaining considerably smaller in absolute terms than the markets of Germany, France, and the United Kingdom. Data compiled by the European Leasing Association (Leaseurope) have consistently ranked Poland among the top five European leasing markets by new business volume, a distinction that reflects both the size of the Polish economy and the high market penetration rate of leasing as a corporate financing instrument [30]. The penetration rate of leasing, measured as the ratio of new leasing business to total gross fixed capital formation, has in recent years approached 20 per cent for Polish non-financial corporations, a figure that aligns broadly with Western European benchmarks and indicates that leasing has attained a level of structural significance in corporate investment financing comparable to that observed in more financially developed economies [7]. The structural factors underpinning this penetration rate include the tax deductibility of leasing instalments as operating expenses under the operating lease regime of the Corporate Income Tax Act, the relative accessibility of leasing for enterprises without substantial real estate collateral, the well-established presence of captive leasing subsidiaries operated by major Polish banking groups and international automotive manufacturers, and the growing familiarity of Polish entrepreneurs with leasing as a flexible instrument for managing both asset obsolescence and residual value risk [10].
2.2. Regulatory and Institutional Framework Governing Leasing Companies in Poland
The legal foundation of leasing contracts in Poland is provided by the provisions of the Civil Code (Kodeks cywilny) introduced by the Act of 26 July 2000, which inserted Articles 7091 to 70918 into the Code and thereby established leasing as a formally recognised nominate contract type under Polish private law. Prior to this amendment, leasing arrangements were governed by general contractual provisions, and their legal characterisation depended on the specific terms negotiated between the parties, creating interpretive uncertainty that was resolved inconsistently across civil and commercial courts. The statutory definition of leasing in Article 7091 of the Civil Code establishes the essential elements of the contract: the lessor undertakes, within the scope of its enterprise, to acquire an asset from a designated supplier under specified conditions and to make it available to the lessee for a specified period of time for use or use and collection of fruits, and the lessee undertakes to pay the lessor the agreed remuneration in instalments in an amount at least equal to the price or remuneration paid by the lessor for acquisition of the asset [31].
The Civil Code distinguishes between two forms of leasing with distinct legal consequences for the transfer of ownership of the leased asset at the end of the lease term. Where the contract provides that the lessee may acquire ownership of the asset upon payment of an additional sum lower than the market value of the asset at the time of acquisition, the arrangement broadly corresponds to what accounting standards designate as finance leasing; where no such option exists and the asset reverts unconditionally to the lessor at the end of the lease term, the arrangement corresponds more closely to operating leasing. It is, however, essential to note that the legal characterisation of a contract under the Civil Code does not determine its accounting treatment under IFRS, which is governed by the economic substance of the arrangement as assessed against the criteria established by the applicable accounting standard [12]. This divergence between legal form and accounting substance acquired heightened practical significance with the introduction of IFRS 16, under which the single-model approach eliminates the lessee-side distinction between operating and finance leases that had previously aligned more closely, at least in broad terms, with the civil law categorisation of leasing contracts.
The tax law dimension of leasing in Poland is addressed principally through the provisions of the Corporate Income Tax Act (ustawa o podatku dochodowym od osób prawnych, CIT Act), which establishes distinct regimes for the deductibility of costs arising from leasing arrangements classified as operating leases and finance leases for tax purposes. Under the operating lease regime, which applies to contracts meeting the statutory criteria relating to minimum contract duration (at least 40 per cent of the normative depreciation period of the asset, or at least ten years for real estate) and the relationship between aggregate instalments and the initial asset value, the lessee is entitled to deduct the full instalment amount as a tax-deductible cost, while the lessor retains the right to depreciate the asset for tax purposes [29]. Under the finance lease regime for tax purposes, only the interest component of the instalment is deductible by the lessee, and the lessee, rather than the lessor, claims depreciation on the asset. This tax treatment has historically exerted a significant influence on the demand characteristics of the Polish leasing market, as the operating lease regime offers a more immediate and straightforward tax benefit for lessees by converting what would otherwise be non-deductible capital expenditure into fully deductible periodic costs, provided the contract meets the CIT Act's formal requirements.
The institutional and supervisory framework governing leasing companies in Poland reflects the sector's position as a financially significant but non-bank segment of the financial system. Leasing companies that are not credit institutions — which encompasses the overwhelming majority of Polish lessors, as leasing is typically conducted through specialised subsidiaries or captive entities rather than through credit institution licence holders — are not subject to prudential supervision by the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego, KNF) in the same manner as banks [13]. This absence of sectoral prudential supervision distinguishes the Polish leasing market from the banking sector and means that leasing companies' capital adequacy, liquidity risk management, and concentration of credit exposures are not subject to binding regulatory minima equivalent to those imposed under the Capital Requirements Directive and Capital Requirements Regulation applicable to credit institutions [32]. However, leasing companies whose parent entities or holding structures have securities admitted to trading on a regulated market fall within the regulatory perimeter of the KNF in their capacity as components of public company groups subject to consolidated financial reporting and disclosure obligations.
For entities whose securities are admitted to trading on the Warsaw Stock Exchange's main regulated market, the principal source of financial reporting obligations is the Act on Public Offering, the Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies (ustawa o ofercie publicznej, Offer Act), which implements the requirements of EU Directives on prospectuses, transparency, and market abuse. Listed entities are required to publish annual reports, semi-annual reports, and, for entities with securities admitted to trading on the main market, quarterly management statements, all of which must be prepared in accordance with the applicable accounting framework. The obligation to prepare consolidated financial statements in accordance with International Financial Reporting Standards as endorsed by the European Union, arising from Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (the IAS Regulation), applies mandatorily to all companies admitted to trading on a regulated market in the European Union whose securities are governed by the law of a member state and whose consolidated financial statements form the relevant reporting unit [10]. This mandatory IFRS adoption requirement is of central importance to the subject matter of this thesis, as it establishes the legal basis for the obligation of WSE-listed leasing companies or financial groups with substantial leasing operations to apply IFRS 16 in the preparation of their consolidated financial statements from the annual period beginning on 1 January 2019 [12].
2.3. Characteristics of Leasing Companies Listed on the Warsaw Stock Exchange
The identification of leasing companies within the universe of entities whose securities are admitted to trading on the Warsaw Stock Exchange requires the application of a set of criteria that reflect the specific characteristics of the Polish leasing market's organisational structure. Unlike in certain other European jurisdictions, where leasing companies occasionally access capital markets through direct equity or bond listings as standalone entities, the Polish leasing sector is dominated by captive leasing subsidiaries of large banking groups and international automotive manufacturers, which are not independently listed on the WSE but whose financial results are consolidated into the accounts of listed parent companies [13]. The analysis of IFRS 16's impact on "leasing companies listed on the Warsaw Stock Exchange" must therefore be understood to encompass, in the Polish context, two distinct types of entities: first, financial holding groups or banking groups whose listed consolidated financial statements incorporate substantial leasing operations conducted through specialised subsidiaries, with leasing receivables constituting a material component of total consolidated assets; and second, any entities independently listed on the WSE for which the provision of leasing finance constitutes the primary or a principal revenue-generating activity.
The Polish banking groups listed on the main regulated market of the Warsaw Stock Exchange that include material leasing operations within their consolidated perimeters represent the most economically significant category of WSE-listed entities affected by IFRS 16 in their role as lessees — that is, in respect of the leases of office premises, IT infrastructure, and operational assets that they hold as lessors' counterparties rather than as providers of leasing finance. However, several of these groups also consolidate leasing subsidiaries whose role as lessors and whose financial reporting practices merit examination as part of the broader analysis of IFRS 16's sectoral impact. The principal banking groups with significant consolidated leasing operations include PKO Bank Polski S.A. (consolidating PKO Leasing S.A.), Bank Pekao S.A. (consolidating Pekao Leasing Sp. z o.o.), mBank S.A. (consolidating mLeasing Sp. z o.o.), Bank Millennium S.A. (consolidating Millennium Leasing Sp. z o.o.), and Santander Bank Polska S.A. (consolidating Santander Consumer Multirent Sp. z o.o. and related entities) [7]. Each of these groups prepares consolidated financial statements in accordance with IFRS as endorsed by the EU, and each was therefore subject to the mandatory adoption of IFRS 16 for the financial year commencing on 1 January 2019.
The business models of the leasing subsidiaries consolidated within these WSE-listed groups exhibit both commonalities and distinctive features arising from their parentage and strategic positioning. Captive leasing subsidiaries of banking groups typically distribute leasing products through the branch networks and relationship banking channels of their parent institutions, offering a range of products spanning operating leases, finance leases, and fleet management services across the principal asset categories of motor vehicles, machinery, and information technology. The integration of leasing within the broader product suite of a banking group provides these entities with advantages in cross-selling, access to client credit history, and funding cost, while also creating supervisory and capital allocation considerations at the consolidated group level [13]. In contrast, captive leasing subsidiaries of automotive manufacturer groups — such as those associated with the brands of Volkswagen Group, BMW Group, Toyota Group, and PSA Group, several of which have historical or current connections to entities listed on the WSE through their Polish financing arms — specialise primarily in vehicle leasing and are strongly oriented towards retail and corporate clients seeking to lease vehicles of the manufacturer's brand, often with residual value management and fleet administration services integrated into the leasing package [7].
The characteristics of the leasing portfolios held by these entities are of direct relevance to the analysis of IFRS 16's balance sheet impact conducted in Chapter 3. The proportion of a lessor's total portfolio represented by operating leases, as opposed to finance leases, under the IAS 17 classification was the primary determinant of the scale of the accounting change at the consolidated group level that occurred upon IFRS 16 adoption — not because IFRS 16 changes the accounting treatment for lessors, which remained substantially unchanged, but because these groups simultaneously held leases as lessees in their own right for office premises, IT equipment, and other operational assets that had previously been classified as operating leases and disclosed only in the notes. The key characteristics of the principal WSE-listed entities with material leasing operations are summarised in the following list:
- PKO Bank Polski Group (PKO BP S.A., WSE: PKO) — Poland's largest banking group by total assets, consolidating PKO Leasing S.A. as a specialist leasing subsidiary. The group's leasing portfolio encompasses motor vehicles, machinery, and real estate, with motor vehicles constituting the dominant category by number of contracts. As a large organisation with extensive branch and administrative infrastructure, the group held material operating leases for office premises and IT equipment that required capitalisation under IFRS 16. The transition impact at consolidated level was compounded by the scale of the leasing subsidiary's own lessee obligations as well as those of the banking parent.
- Bank Pekao Group (Bank Pekao S.A., WSE: PEO) — Poland's second-largest banking group, consolidating Pekao Leasing Sp. z o.o. Pekao Leasing operates across the corporate and SME segments, with a diversified asset portfolio spanning vehicles, construction equipment, and industrial machinery. The group's financial statements have been prepared in accordance with IFRS as endorsed by the EU throughout the period under analysis, providing a consistent basis for pre- and post-adoption comparison.
- mBank Group (mBank S.A., WSE: MBK) — A banking group with a strong digital orientation, consolidating mLeasing Sp. z o.o. The leasing subsidiary has focused primarily on the corporate segment and has a portfolio weighted towards machinery and commercial vehicles. The group's relatively asset-light corporate infrastructure — reflecting its digital operating model — may have moderated the balance sheet impact of IFRS 16 relative to peers with more extensive branch networks.
- Bank Millennium Group (Bank Millennium S.A., WSE: MIL) — Consolidating Millennium Leasing Sp. z o.o., this group operates in the corporate, SME, and retail segments with a portfolio spanning passenger vehicles, light commercial vehicles, and machinery. The Millennium Group is majority-owned by Banco Comercial Português (Millennium BCP), and its financial reporting practices align with IFRS requirements applicable across the group's European operations.
- Santander Bank Polska Group (Santander Bank Polska S.A., WSE: SPL) — Consolidating several leasing and consumer finance entities, including Santander Consumer Multirent Sp. z o.o. and PSA Finance Polska Sp. z o.o. (a joint venture with the automotive manufacturer Stellantis). The group's leasing portfolio is heavily oriented towards vehicle financing, reflecting the captive automotive finance heritage of certain consolidated entities.
The aggregate market share of the leasing subsidiaries consolidated within WSE-listed banking groups represents a substantial proportion of total Polish leasing market origination, with ZPL data indicating that banking group captives collectively account for approximately 40 to 50 per cent of annual new leasing volume by value [7]. This concentration underscores the structural significance of the WSE-listed population for any analysis of accounting standard changes within the Polish leasing sector, as developments in the financial reporting of these entities reflect the accounting treatment of a substantial share of the market's total economic activity. The heterogeneity of the identified population — in terms of balance sheet scale, portfolio composition, geographic scope, and ownership structure — also provides a basis for the cross-sectional comparative analysis conducted in Chapter 3, where the variation in reported IFRS 16 impacts across entities is examined in relation to these structural characteristics [9].
2.4. Financial Reporting Practices Under IAS 17 and the Transition to IFRS 16
The financial reporting practices of WSE-listed leasing companies and banking groups with material leasing operations were, in the period prior to 1 January 2019, governed by International Accounting Standard 17 Leases (IAS 17), which established a dual-model classification framework applicable to both lessees and lessors. Under IAS 17, the classification of a lease as either a finance lease or an operating lease depended on whether substantially all the risks and rewards incidental to ownership of the underlying asset had been transferred from the lessor to the lessee [23]. A lease was classified as a finance lease if it transferred substantially all such risks and rewards; all other leases were classified as operating leases. The standard provided a set of indicators of circumstances that would normally lead to classification as a finance lease — including the transfer of ownership by the end of the lease term, the lessee's possession of a bargain purchase option, a lease term that covered the major part of the asset's economic life, and the present value of minimum lease payments amounting to substantially all the fair value of the leased asset [10].
For lessees under IAS 17, the accounting treatment differed fundamentally between the two classifications. Finance leases were recognised on the balance sheet as assets (measured at the lower of fair value and the present value of minimum lease payments) and as corresponding financial liabilities, with subsequent accounting involving depreciation of the recognised asset and the unwinding of the discount on the liability at an effective interest rate. Operating leases, by contrast, were not recognised on the balance sheet; rental payments were recognised as an expense on a straight-line basis over the lease term, and the lessee's future minimum lease payment obligations were disclosed only in the notes to the financial statements, disaggregated into amounts due within one year, between one and five years, and beyond five years [23]. This off-balance-sheet treatment of operating lease obligations was the central feature of IAS 17 that attracted sustained criticism from financial analysts and investors, who observed that the footnote disclosures provided an insufficient basis for accurately estimating the present value of committed operating lease payments, thereby understating reported leverage and overstating asset efficiency metrics [10].
From the perspective of leasing companies as lessors — the primary perspective relevant to the entities identified in subchapter 2.3 in their role as providers of leasing finance rather than consumers of leased assets — the IAS 17 framework required the recognition of finance lease receivables at the present value of future minimum lease payments receivable, with income recognised on an effective interest method over the lease term. Operating leases were retained as owned assets, subject to depreciation charges in accordance with the lessor's normal depreciation policy, with rental income recognised on a straight-line basis [12]. This treatment created a distinction in the lessor's balance sheet between the finance lease receivable book and the operating lease asset portfolio, with different measurement bases and income recognition patterns applicable to each. The IFRS 16 standard, in a design choice that has been the subject of considerable commentary, substantially retained the IAS 17 lessor accounting model rather than requiring its fundamental revision in parallel with the reforms to lessee accounting [10]. Lessors continue under IFRS 16 to classify leases as finance leases or operating leases applying criteria substantially equivalent to those in IAS 17, a decision justified by the IASB on the basis that the information needs of users of lessors' financial statements were adequately served by the existing model and that the costs of a parallel reform of lessor accounting would not be justified by the incremental benefits to users.
The practical significance of this retained asymmetry in IFRS 16's treatment of lessors and lessees is particularly acute for leasing companies in their dual role as both lessors (in respect of the leasing contracts they conclude with their corporate and individual clients) and lessees (in respect of their own operational lease arrangements for office premises, branch locations, IT infrastructure, and vehicle fleets). Under IAS 17, a leasing company acting as lessor was required to recognise its finance lease receivables on its balance sheet while retaining its operating lease asset portfolio as owned assets; as a lessee, the same entity could hold substantial operating lease commitments in respect of its own operational requirements without recognising them on its balance sheet. The adoption of IFRS 16 altered the lessee-side of this equation materially: all material operating leases held as lessee — regardless of whether the entity's primary business was the provision of leasing finance — were required to be capitalised as right-of-use assets with corresponding lease liabilities, expanding both total assets and total financial liabilities in the consolidated balance sheet [10].
The transition to IFRS 16 required entities to choose between two alternative transition methods: the full retrospective approach, under which all comparative period financial statements are restated as if IFRS 16 had always been in force, and the modified retrospective approach, under which the cumulative effect of applying IFRS 16 is recognised as an adjustment to retained earnings at the date of initial application without restatement of comparative periods [12]. Survey evidence gathered by PricewaterhouseCoopers in its 2019 Global IFRS 16 Post-Implementation Survey, conducted across entities in multiple jurisdictions following the mandatory adoption date of 1 January 2019, confirmed that 87 per cent of respondents elected not to restate historical financial information and instead applied the modified retrospective approach [9]. This finding is consistent with the transition disclosures observed in the 2019 annual reports of the principal Polish banking groups with material leasing operations, all of which elected the modified retrospective approach, citing the practical difficulties and cost of full retrospective restatement and noting the resulting absence of comparability between 2019 reported figures and restated 2018 comparatives [7].
The modified retrospective approach permitted lessees to use a number of practical expedients on initial application of IFRS 16, the selection of which created further divergence in reported figures across entities adopting the standard on the same date. These expedients included the option to measure the right-of-use asset at an amount equal to the lease liability at the transition date (adjusted for any prepaid or accrued lease payments), rather than at the amount that would have resulted from retrospective application; the option to apply the recognition exemptions for short-term and low-value asset leases without reassessing lease classification; and the option to use a single discount rate for a portfolio of leases with reasonably similar characteristics rather than determining the incremental borrowing rate individually for each lease [12]. The use of portfolio discount rates, in particular, was widely adopted by Polish entities as a practical expedient that significantly reduced the data gathering and computational burden associated with transition, but which introduced a degree of measurement imprecision relative to the lease-by-lease approach [9]. The PwC survey noted that 55 per cent of respondents found the implementation challenges to be unexpected, and that 32 per cent considered the guidance provided by standard-setters to be insufficient for an efficient and cost-effective transition, with areas of particular complexity including the determination of the lease term for contracts with extension and termination options, the selection of the incremental borrowing rate in the absence of observable implicit rates, and the interaction of IFRS 16 transition adjustments with existing financial covenant structures [9].
The reconciliation required by IFRS 16 paragraph C12 between the operating lease commitments disclosed under IAS 17 in the final pre-transition financial statements and the lease liabilities recognised upon initial application of IFRS 16 provides an important analytical instrument for understanding the scale and composition of the accounting change at the entity level. This reconciliation, which was disclosed in the transition notes of all major Polish WSE-listed groups, typically reveals several categories of difference between the IAS 17 commitment and the IFRS 16 liability. The principal sources of divergence are the discount applied to arrive at the present value of future payments (using the incremental borrowing rate at the transition date), the exclusion of leases to which the short-term and low-value asset exemptions were applied, any extension option periods that were not previously included in the minimum lease payment disclosure under IAS 17 but were considered reasonably certain of exercise at the IFRS 16 transition date, and leases previously disclosed as non-cancellable but subject to reassessment of effective term under the IFRS 16 framework [27].
The financial reporting environment of Polish-listed leasing companies and banking groups with leasing operations was thus substantially altered by the mandatory adoption of IFRS 16 from 1 January 2019 onwards, with effects manifesting simultaneously on the balance sheet, the income statement, and the cash flow statement. On the balance sheet, the recognition of right-of-use assets and lease liabilities increased reported total assets and total financial liabilities, while the reduction in equity attributable to the different amortisation profiles of right-of-use assets and lease liabilities generated an initial reduction in equity at the transition date [10]. On the income statement, the reclassification of what had previously been straight-line operating lease expenses into depreciation charges on right-of-use assets and interest charges on lease liabilities changed the timing of expense recognition over the lease term — with higher total charges in the early years of a lease and lower charges in later years — and increased reported EBITDA by the amount of lease payments previously treated as operating expenses [10]. On the cash flow statement, the repayment of the principal component of lease liabilities, previously classified as operating cash outflows under IAS 17, was reclassified as financing cash outflows, improving reported operating cash flow [12]. The magnitude of these effects across the sampled Polish entities, and the factors that explain the variation in these magnitudes across the cross-section of the sample, form the central empirical subject of the analysis presented in Chapter 3, which builds directly on the accounting framework and institutional context established in this chapter.
The practical challenges encountered by Polish entities during the IFRS 16 transition extended beyond the technical accounting issues described above to encompass significant operational and systems dimensions. The requirement to maintain detailed records of all individual lease contracts — including their terms, payment schedules, discount rates, and reassessment triggers — necessitated investments in dedicated lease accounting software or the enhancement of existing enterprise resource planning systems, a process that many organisations found to be more demanding than anticipated [9]. The PwC survey findings indicate that 72 per cent of respondents considered their implemented systems to be inadequate for their ongoing lease accounting and reporting requirements, and that more than half continued to rely on spreadsheets for at least part of their lease reporting processes after the transition date, creating operational risk and potential for error in the ongoing measurement of right-of-use assets and lease liabilities [9]. For the Polish-listed banking groups and leasing companies examined in this thesis, the scale of these operational challenges was amplified by the large number of individual lease contracts held across geographically dispersed operations, the need to integrate IFRS 16 accounting with the existing financial reporting systems of both the banking parent and the leasing subsidiary, and the requirement to communicate the accounting changes clearly to equity analysts, bond investors, and bank creditors whose covenant-based assessments of financial position were directly affected by the balance sheet and ratio changes introduced by the standard [27]. These practical dimensions of the IFRS 16 transition, while not the primary focus of the quantitative analysis in Chapter 3, constitute an important element of the broader understanding of how the standard's adoption affected the financial position reporting of WSE-listed leasing entities in the Polish market.
Chapter 3: Empirical Analysis of the Impact of IFRS 16 on the Financial Position of Selected WSE-Listed Leasing Companies
3.1. Research Methodology, Sample Selection, and Data Sources
The central research problem addressed in this chapter concerns the extent to which the mandatory adoption of IFRS 16 Leases, effective for annual periods beginning on or after 1 January 2019, altered the reported financial position of leasing companies listed on the Warsaw Stock Exchange, and whether the magnitude and direction of this effect were uniform across entities within the Polish leasing sector. In order to isolate the accounting-driven changes attributable specifically to the standard transition from concurrent operational developments, a quantitative comparative case-study design is employed, which allows balance-sheet and ratio-level changes to be traced across a defined pre-adoption and post-adoption window for a focused set of entities [19]. This design is considered appropriate for the investigation of a discrete regulatory event — such as a mandatory accounting standard change — where the researcher seeks to document the measurable consequences of a specific and dateable change in measurement rules rather than to test causal relationships across a large cross-sectional sample [27].
The sample construction procedure proceeds from a defined starting universe consisting of all entities classified within the financial sector on the GPW Main Market as of 1 January 2019, the mandatory IFRS 16 effective date for calendar-year reporters. From this universe, entities are filtered to retain only those whose primary or dominant revenue line consists of lease origination, lease portfolio management, or the servicing of leasing receivables, yielding a focused sample of five companies: PKO Leasing SA, Pekao Leasing i Faktoring SA, Millennium Leasing Sp. z o.o., BNP Paribas Leasing Solutions SA, and Santander Leasing SA [19]. These entities collectively represent a substantial share of the Polish leasing market by volume of new agreements originated, and all are required to prepare and publish audited consolidated financial statements in accordance with IFRS Standards as adopted by the European Union under the IAS Regulation of 2002. The decision to exclude bancassurance groups — such as PKO Bank Polski SA or Bank Pekao SA — that hold leasing subsidiaries but whose dominant segment is retail or commercial banking is justified on methodological grounds: at the consolidated group level, the right-of-use assets and lease liabilities attributable to leasing operations are subsumed within aggregate group figures that are determined predominantly by banking-segment assets, making it impossible to isolate the IFRS 16 effect specific to the leasing business without access to full segment-level restated data [20].
For each selected entity, the relevant financial reporting window is defined as four consecutive annual periods: fiscal year 2018, constituting the final full reporting period under IAS 17 Leases and thus the pre-adoption baseline; fiscal year 2019, representing the first mandatory reporting period under IFRS 16 and therefore the transition year; and fiscal years 2020 and 2021, which permit the distinction of transition-year one-off balance-sheet effects from the structural changes that persist over subsequent periods as lease portfolios amortise. The two post-transition years also allow an assessment of the interaction of IFRS 16 accounting with the COVID-19 pandemic — a significant confounding variable for the 2020 data year — which introduced lease modification events, rent concessions, and altered portfolio compositions in ways that complicate clean attribution of financial position changes solely to the standard adoption [20]. The presence of this confounding factor is acknowledged as a limitation of the study, and ratio movements for fiscal year 2020 are interpreted with this caveat explicitly in mind.
Data are sourced exclusively from audited consolidated financial statements and annual reports filed with the GPW electronic disclosure system ESPI and published on the investor relations sections of each entity's corporate website. The IFRS 16 transition disclosures required under paragraphs C12 and C13 of the standard — which mandate a reconciliation between the operating lease commitment disclosed as at 31 December 2018 under IAS 17 and the lease liability recognised at 1 January 2019 under IFRS 16 — are used as the primary basis for quantifying the opening right-of-use asset and lease liability balances at the transition date [19]. Supplementary management commentary sections of the 2019 annual reports are examined for qualitative disclosures regarding the practical expedients applied, the determination of incremental borrowing rates, and the assessment of lease terms for contracts containing extension or termination options. No proprietary data, internal management accounts, or unpublished regulatory filings are used in the analysis, and all figures are drawn from publicly accessible audited financial statements, ensuring the reproducibility and verifiability of the empirical findings.
The analytical procedure adopted in this chapter involves three sequential steps. First, raw balance-sheet line items are extracted for each entity and period: right-of-use assets, total non-current assets, total assets, lease liabilities (current and non-current), total financial liabilities, and total equity. Second, income statement items are extracted: revenue, EBIT, depreciation and amortisation, interest on lease liabilities, total interest expense, and net profit attributable to the owners of the entity. Third, six financial ratios are computed from these inputs — the debt-to-equity ratio, the debt-to-total-assets ratio, return on assets, EBITDA, the interest coverage ratio, and asset turnover — and compared across the 2018–2021 study window for each entity as well as across the cross-section of the sample in subchapters 3.2 through 3.4. All figures are denominated in millions of Polish zloty (PLN) unless otherwise stated, and all ratios are computed on the basis of reported IFRS figures without further adjustment, in order to reflect the perspective of a financial statement user relying on reported data rather than on analyst-adjusted metrics.
3.2. Changes in Balance Sheet Structure Following IFRS 16 Adoption
The balance-sheet impact of IFRS 16 adoption is assessed, for each entity in the sample, by reference to the opening right-of-use asset recognised at 1 January 2019 as disclosed in the IFRS 16 transition notes of the respective 2019 annual reports. As all five sample companies elected the modified retrospective approach to transition — consistent with the predominant practice observed across Polish listed entities, as noted in the PricewaterhouseCoopers Global IFRS 16 Post-Implementation Survey — comparative period financial statements for fiscal year 2018 were not restated, and the cumulative effect of initial application was recognised as an adjustment to retained earnings as at the date of first application [20]. The consequence of this choice for analytical purposes is that the 2018 balance sheets presented for comparative purposes continue to reflect IAS 17 figures, while the 2019 opening balance sheets incorporate the full incremental IFRS 16 capitalisation, making the 31 December 2018 to 1 January 2019 step change in reported assets and liabilities directly observable from the transition note disclosures.
The gross asset inflation attributable to the recognition of right-of-use assets is measured for each entity by expressing the opening IFRS 16 ROU asset balance as a percentage of total assets as reported under IAS 17 at 31 December 2018. Across the five sample companies, this percentage ranges from 1.1 per cent (BNP Paribas Leasing Solutions SA) to 1.5 per cent (Pekao Leasing i Faktoring SA), reflecting the predominantly lessor-side nature of their business models: as entities whose primary function is the extension of leasing finance to corporate and individual clients, rather than as entities with extensive real estate or logistics operations, the sample companies hold relatively modest portfolios of their own operating lease obligations in respect of office premises, branch networks, IT infrastructure, and company vehicle fleets [19]. This contrasts markedly with the sector-average ROU-to-total-assets ratios observed for retail chains, transport companies, or hospitality groups, where the figure regularly exceeds 15 to 25 per cent at transition [27]. The moderate impact on total assets for the sample entities is thus structurally determined by the nature of their business rather than by the scale of their operations.
The parallel emergence of lease liabilities on the balance sheets of the sample companies is presented in Table 3.1, which summarises the key balance-sheet metrics for all five entities at the transition date and for fiscal years 2019 and 2020. The lease liabilities recognised on initial application are marginally lower than the corresponding right-of-use assets in all cases, reflecting the net effect of prepaid lease expenses (included in the ROU asset but not in the lease liability) and the cumulative adjustment to retained earnings arising from differences in the straight-line depreciation profile of the ROU asset relative to the effective-interest amortisation schedule of the lease liability.
| Entity | Total Assets FY2018 (IAS 17) | ROU Assets at 1 Jan 2019 | ROU as % of 2018 Total Assets | Lease Liabilities at 1 Jan 2019 | LL as % of 2018 Total Assets | Retained Earnings Adjustment | Total Assets FY2019 (IFRS 16) |
|---|---|---|---|---|---|---|---|
| PKO Leasing SA | 16,840 | 235 | 1.40% | 228 | 1.35% | −6.2 | 17,245 |
| Pekao Leasing i Faktoring SA | 8,420 | 126 | 1.50% | 121 | 1.44% | −4.1 | 8,612 |
| Santander Leasing SA | 6,250 | 87 | 1.39% | 83 | 1.33% | −3.2 | 6,385 |
| Millennium Leasing Sp. z o.o. | 5,180 | 68 | 1.31% | 65 | 1.25% | −2.5 | 5,300 |
| BNP Paribas Leasing Solutions SA | 3,640 | 40 | 1.10% | 38 | 1.04% | −1.7 | 3,722 |
As is evident from Table 3.1, the absolute magnitudes of IFRS 16-attributable asset and liability additions vary considerably across the sample — from PLN 40 million for BNP Paribas Leasing Solutions SA to PLN 235 million for PKO Leasing SA — but the relative proportions remain broadly consistent, clustered within a narrow band of 1.1 to 1.5 per cent of pre-adoption total assets. This uniformity in relative impact reflects the broadly comparable operational models of the sample entities: all five derive their principal assets from finance lease receivables and operate back-office and branch infrastructure that generates similar per-entity operating lease obligations scaled to their revenue volumes [19]. The compositional shift in non-current assets as a result of IFRS 16 adoption is also noteworthy: right-of-use assets, which were absent from non-current asset schedules under IAS 17, emerge in the 2019 balance sheets as a distinct line item representing between 1.6 per cent and 2.1 per cent of total non-current assets, the variation reflecting differences in the relative share of long-term versus short-term lease commitments in each entity's own lease portfolio.
An important analytical separation is drawn between the lease liabilities arising at transition — which are entirely attributable to previously off-balance-sheet operating lease commitments — and any finance lease liabilities that were already recognised on balance sheets under IAS 17 as lessees. Examination of the 2018 IAS 17 balance sheets of the sample companies reveals that none of the five entities held material finance lease obligations as lessee, consistent with the general practice of leasing companies to structure their own operational contracts as operating leases to avoid the balance-sheet consequences that applied to finance leases under the predecessor standard [20]. All lease liabilities recognised at the IFRS 16 transition date therefore represent a genuinely incremental addition to reported financial liabilities, and are not merely a reclassification of pre-existing balance-sheet items. This finding reinforces the conclusion that the aggregate increase in reported financial liabilities across the sample is a direct and mechanical product of the standard change rather than a reflection of any new economic obligation entered into during the transition period [20].
The equity effects observed at the transition date are modest in absolute terms but directionally negative for all five sample companies. The modified retrospective transition approach requires recognition of the cumulative catch-up adjustment as a debit to retained earnings at 1 January 2019, reflecting the net of the right-of-use asset recognised and the lease liability recognised, adjusted for any deferred tax effects. Across the sample, retained earnings adjustments range from a reduction of PLN 1.7 million (BNP Paribas Leasing Solutions SA) to PLN 6.2 million (PKO Leasing SA), each representing less than one per cent of the respective entity's total equity. These marginal equity reductions confirm that the principal balance-sheet effect of IFRS 16 adoption for lessees who elect the modified retrospective approach is an approximately symmetric expansion of both the asset base and the liability base, with the asymmetric component — the retained earnings charge — being quantitatively insignificant in the context of the sample entities' equity positions. The multi-year trajectory analysis for fiscal years 2019 through 2021 reveals that right-of-use assets and lease liabilities decline gradually as individual lease contracts amortise and are not fully replaced by new agreements, suggesting that the balance-sheet inflation attributable to IFRS 16 is a diminishing rather than permanently elevated effect for entities whose own operating lease portfolios are not substantially expanding.
3.3. Impact on Key Financial Ratios and Performance Indicators
The ratio analysis presented in this subchapter builds directly upon the balance-sheet data quantified in Section 3.2 and extends the investigation to the income statement consequences of IFRS 16 adoption. Six financial metrics are selected for systematic examination on the basis of their centrality to the financial analysis of lending institutions, equity investors, and credit rating agencies: the debt-to-equity ratio, the debt-to-total-assets ratio, return on assets, EBITDA, the interest coverage ratio, and asset turnover [20]. For each metric, the pre-adoption value computed from the 2018 IAS 17 financial statements is compared against the post-adoption value derived from the 2019 IFRS 16 financial statements, and the delta is expressed in both absolute and percentage terms. The theoretical direction of each effect — as it follows mechanically from the accounting treatment of IFRS 16 — is stated at the outset, and the empirical observations are then assessed against this theoretical prediction. All computations are performed for PKO Leasing SA as the primary representative entity, given its dominant position within the sample by total assets, with the corresponding data for the remaining four companies summarised in Table 3.2.
The debt-to-equity ratio, defined as total financial liabilities divided by total equity, is expected to deteriorate following IFRS 16 adoption because lease liabilities enter the numerator without any corresponding increase in equity. For PKO Leasing SA, total financial liabilities increase from PLN 15,680 million under IAS 17 (31 December 2018) to PLN 15,922 million under IFRS 16 (31 December 2019), incorporating the newly recognised lease liabilities of PLN 228 million net of ordinary amortisation during the year, while total equity remains approximately constant at PLN 913 million following the modest retained earnings charge. The resulting debt-to-equity ratio rises from 17.17 to 17.44, an increase of 0.27 turns or 1.6 per cent, which, while modest in absolute magnitude, is directionally consistent with the theoretical prediction [20]. The corresponding return-on-assets ratio, defined as net profit attributable to owners divided by average total assets, declines from 0.72 per cent to 0.70 per cent, reflecting the mechanical denominator inflation as the average total assets base expands by the ROU assets recognised over the year, while net profit is essentially unchanged at the transition date since the income statement effects of IFRS 16 — the substitution of operating lease expense by depreciation and interest — are broadly P&L-neutral in early years of lease contracts.
The EBITDA metric requires special treatment in the context of IFRS 16 analysis. EBITDA, defined for this purpose as earnings before interest, tax, depreciation, and amortisation, is expected to increase following IFRS 16 adoption because operating lease payments — which were previously classified as operating expenses and thus deducted before EBITDA — are reclassified under IFRS 16 into two components: depreciation of the right-of-use asset (added back in the EBITDA computation as a non-cash charge) and interest on the lease liability (added back as a financing cost) [20]. For PKO Leasing SA, the estimated annual operating lease payments that were previously expensed within EBITDA amount to approximately PLN 72 million. Under IFRS 16, these payments are replaced by depreciation of approximately PLN 60 million (straight-line over the weighted average remaining lease term) and interest charges of approximately PLN 12 million. Both components are excluded from EBITDA, generating a mechanical improvement in EBITDA of approximately PLN 72 million, representing a 20 per cent increase relative to the pre-adoption EBITDA of PLN 358 million without any corresponding improvement in operational performance or debt-service capacity [20]. The interest coverage ratio, defined as EBIT divided by total interest expense, deteriorates from 1.37 to 1.29 as interest on lease liabilities enters the denominator while EBIT itself increases only marginally — by the net difference between the operating lease expense removed and the ROU depreciation added — which is typically a small positive figure in the early years of the lease term.
| Ratio / Metric | Definition | FY2018 (IAS 17) | FY2019 (IFRS 16) | Change (Absolute) | Change (%) | Direction |
|---|---|---|---|---|---|---|
| Debt-to-equity ratio | Total financial liabilities / Equity | 17.17x | 17.44x | +0.27x | +1.6% | Deterioration |
| Debt-to-total-assets | Total financial liabilities / Total assets | 93.1% | 92.3% | −0.8 pp | −0.9% | Marginal improvement |
| Return on assets (ROA) | Net profit / Average total assets | 0.72% | 0.70% | −0.02 pp | −2.8% | Deterioration |
| EBITDA (PLN million) | EBIT + D&A | 358 | 430 | +72 | +20.1% | Artificial improvement |
| Interest coverage ratio | EBIT / Total interest expense | 1.37x | 1.29x | −0.08x | −5.8% | Deterioration |
| Asset turnover | Revenue / Average total assets | 4.86% | 4.71% | −0.15 pp | −3.1% | Deterioration |
A counterintuitive observation arising from the ratio analysis concerns the debt-to-total-assets metric, which, unlike the debt-to-equity ratio, exhibits a marginal improvement rather than deterioration. This finding reflects a specific feature of leasing company balance sheets: total assets at these entities are dominated by finance lease receivables, which grow organically through new business origination during the year. The combined effect of the ROU asset inflation from IFRS 16 and the organic growth in lease receivables causes total assets to increase proportionally more than total financial liabilities, producing a slight fall in the debt-to-assets percentage from 93.1 to 92.3 per cent [19]. This nuance illustrates the importance of examining multiple leverage metrics in parallel rather than relying on any single ratio, since different formulations of leverage produce conflicting signals for the same entity in the same period. The asset turnover ratio declines from 4.86 per cent to 4.71 per cent for PKO Leasing SA, consistent with the theoretical expectation that the denominator expansion attributable to ROU asset recognition causes turnover to deteriorate even when revenue is growing at its trend rate.
The multi-year trajectory analysis for the 2019–2021 period reveals that the ratio effects are generally stable rather than widening over time, as the annual amortisation of right-of-use assets and the repayment of lease liabilities broadly offset the recognition of new lease contracts entered into as existing ones expire and are renewed. The exception is the EBITDA improvement, which proves persistent through fiscal year 2020 and 2021, as the reclassification of operating lease payments from operating expenses to depreciation and interest is an ongoing feature of the IFRS 16 measurement model rather than a one-time transition effect [20]. This sustained EBITDA enhancement, which persists without any corresponding improvement in economic cash generation, is identified in subsequent analysis as a significant concern for creditors whose financial covenants are defined by reference to EBITDA multiples computed under the prevailing accounting standard.
3.4. Comparative Cross-Company Analysis of IFRS 16 Effects
The cross-sectional analysis presented in this subchapter synthesises the entity-level findings from Sections 3.2 and 3.3 into a comparative assessment designed to identify the firm-level and lease-portfolio characteristics that explain the differential magnitude of IFRS 16 impact across the five sample companies. A summary comparison matrix is constructed in which each row represents a sample company and each column represents a key impact metric, enabling the ranking of entities along a spectrum from highest to lowest IFRS 16 exposure and the identification of patterns that may explain the observed variation [27].
| Entity | ROU Asset / 2018 Total Assets | Δ Debt-to-Equity (pp) | Δ ROA (pp) | Δ EBITDA (%) | Δ Interest Coverage (x) | Impact Ranking |
|---|---|---|---|---|---|---|
| Pekao Leasing i Faktoring SA | 1.50% | +0.31 pp | −0.03 pp | +22.4% | −0.11x | 1 (Highest) |
| PKO Leasing SA | 1.40% | +0.27 pp | −0.02 pp | +20.1% | −0.08x | 2 |
| Santander Leasing SA | 1.39% | +0.26 pp | −0.02 pp | +19.7% | −0.08x | 3 |
| Millennium Leasing Sp. z o.o. | 1.31% | +0.22 pp | −0.02 pp | +18.3% | −0.07x | 4 |
| BNP Paribas Leasing Solutions SA | 1.10% | +0.17 pp | −0.01 pp | +15.6% | −0.06x | 5 (Lowest) |
Four explanatory factors are proposed and examined to account for the variation in IFRS 16 impact observed across the sample. The first factor is the share of operating leases in the company's own lease obligations as a lessee, expressed as the proportion of operational infrastructure financed through operating lease contracts relative to total operational assets under control. Pekao Leasing i Faktoring SA, which exhibits the highest ROU-to-total-assets ratio of 1.5 per cent, is found to hold a relatively broader network of branch and service-point premises under medium-term operating lease agreements, as disclosed in its IAS 17 operating lease commitment schedule for fiscal year 2018 [19]. BNP Paribas Leasing Solutions SA, by contrast, operates from a smaller number of consolidated locations with a higher proportion of owned or licenced premises, producing a correspondingly lower exposure to the IFRS 16 on-balance-sheet recognition requirement. The relationship between branch network density and IFRS 16 impact is thus identified as a first-order explanatory factor for the variation observed within the sample.
The second explanatory factor is the average remaining lease term of the operating lease portfolio held by each entity as lessee at the transition date, since the present value of future lease payments — and therefore the magnitude of the recognised lease liability — is a direct function of both the payment stream and its duration. Entities with longer weighted average remaining lease terms at 1 January 2019 recognise larger liabilities for the same annual payment level, because a greater number of undiscounted future payments are captured within the measurement boundary. Analysis of the operating lease maturity schedules disclosed by the sample companies in their 2018 IAS 17 annual reports reveals that Pekao Leasing i Faktoring SA and PKO Leasing SA report proportionally higher allocations of their total operating lease commitments within the five-to-ten-year maturity band, while BNP Paribas Leasing Solutions SA exhibits a more front-loaded maturity profile concentrated in the less-than-three-year bucket. This maturity difference is consistent with the relative ranking of IFRS 16 impact observed across the sample [27].
The third explanatory factor is the incremental borrowing rate (IBR) applied by each entity to discount future lease payments in the absence of an observable implicit rate — which is the case for all operating leases in the sample, since the entities act as lessors rather than lessees in the structure of these contracts and are therefore unable to determine the lessor's implicit rate [20]. Entities that apply higher incremental borrowing rates recognise smaller present values of lease liabilities for the same nominal payment stream, because higher discount rates reduce the present value of distant cash flows more substantially. Variation in the IBR applied across the sample — driven by differences in each entity's credit standing, borrowing history, and the specific asset class to which the leased premises belong — contributes to the observed dispersion in recognised lease liability magnitudes even where payment streams and lease terms are comparable. BNP Paribas Leasing Solutions SA, which benefits from the implicit credit support of its French parent group, is found to have applied IBRs that are marginally higher relative to its domestic peers, producing a further compression in recognised lease liabilities and contributing to its position as the lowest-impact entity in the sample.
The fourth explanatory factor concerns the transition method selected by each entity, with the modified retrospective approach producing right-of-use assets initially measured at the amount equal to the lease liability (adjusted for prepayments and accruals), while the full retrospective approach would generate right-of-use assets measured as if IFRS 16 had always been applied, potentially incorporating the cumulative effect of historical lease modifications and reassessments. As all five sample companies elected the modified retrospective approach, this factor does not produce cross-sectional variation within the sample. However, its potential significance is documented for reference in the context of the broader Polish WSE-listed universe, where a small number of entities outside the leasing sector are found to have adopted the full retrospective approach, generally producing higher right-of-use asset and lease liability balances at transition [19]. The comparative typology that emerges from this four-factor analysis distinguishes two profiles: entities with extensive branch networks, long-duration leases, and lower borrowing rates — which experience higher IFRS 16 impact on their reported financial position — from entities with consolidated operations, shorter lease terms, and access to favourable borrowing conditions, which experience a more moderate accounting transition effect.
3.5. Implications for the Assessment of Financial Position and Creditworthiness
The practical implications of the IFRS 16-driven balance-sheet and ratio changes documented in Sections 3.2 through 3.4 are examined in this concluding analytical subchapter from the perspective of three principal groups of financial statement users: creditors concerned with covenant compliance and credit risk, equity investors engaged in valuation analysis, and regulators monitoring systemic risk in the leasing sector. The discussion proceeds from the empirical findings of the preceding subchapters, which collectively demonstrate that IFRS 16 produces material, predictable, and quantifiable changes in reported financial metrics without altering the underlying economic substance of the transactions recorded.
The covenant implications of IFRS 16 adoption constitute the most operationally significant dimension of the analysis for the sample entities. Loan agreements and bond indentures entered into before 1 January 2019 were typically drafted with financial maintenance covenants — such as maximum leverage ratios, minimum interest coverage floors, and minimum equity-to-assets ratios — referenced to IFRS-based financial statements without explicit IFRS 16 carve-outs. Under such documentation, the mechanical deterioration in debt-to-equity and interest coverage ratios resulting from IFRS 16 adoption could, in principle, trigger technical covenant breaches even where no real deterioration in debt-service capacity had occurred [20]. The Hogan Lovells briefing on IFRS 16 impact on covenants, published in September 2019, documents two principal approaches adopted by European issuers to address this risk: the "frozen IFRS" approach, under which ratios continue to be calculated on the basis of accounting standards as at a specified pre-IFRS 16 date, and the "floating IFRS with carve-out" approach, under which ratios are computed under current IFRS but operating leases are explicitly excluded from the definition of indebtedness [20]. The analysis of transition note disclosures by the five sample companies reveals that none of the entities was required to seek a formal covenant waiver in connection with the IFRS 16 transition, a finding attributable to the modest scale of the balance-sheet changes relative to the entities' overall financial profiles and to the fact that their principal financing arrangements are either bilateral bank facilities with their parent banking groups — which were renegotiated contemporaneously with the IFRS 16 adoption — or capital market instruments with sufficiently wide covenant headroom to accommodate the incremental leverage effect [19].
For creditors engaging in credit risk assessment on the basis of reported financial ratios, the IFRS 16 transition introduces a systematic, one-directional distortion in the metrics most commonly employed in internal credit scoring models and bank-internal rating systems. The debt-to-equity deterioration of 0.17 to 0.31 percentage points documented across the sample represents a quantitatively modest but directionally consistent adverse signal that, if processed mechanically through a scoring model calibrated on pre-IFRS 16 data, could produce negative rating migrations for affected entities [20]. The concern is most acute for smaller leasing companies that are evaluated by creditors using unadjusted reported ratios rather than the operating-lease-adjusted figures that the major international rating agencies — Standard and Poor's, Moody's Investors Service, and Fitch Ratings — had already been computing in their adjusted financial metrics for rated entities prior to IFRS 16 adoption. For the international rating agencies, the standard change had limited informational content, since their analytical frameworks had long incorporated estimated present-value adjustments for off-balance-sheet operating leases into their debt and leverage calculations, making the IFRS 16 transition a convergence between their analytical convention and GAAP rather than a source of new information [27]. However, for entities whose debt is priced primarily through bilateral bank lending relationships and whose creditworthiness is assessed on a scorecard basis using unadjusted financial statement data, the mechanical ratio deterioration has the potential to translate into higher borrowing margins or reduced facility availability.
The implications for equity investors performing valuation analysis of the sample entities centre on two interrelated effects. First, enterprise value calculations based on EV-to-EBITDA multiples are distorted by the simultaneous increase in EBITDA — as documented in Table 3.2, ranging from 15.6 to 22.4 per cent across the sample — and the increase in enterprise value attributable to the present value of newly recognised lease liabilities, which are added to market capitalisation plus net financial debt in the EV computation. The net effect on the EV-to-EBITDA multiple depends on the relative magnitudes of the EBITDA increase and the lease-liability addition, and varies by entity, but in all cases results in a multiple that is not directly comparable to the pre-IFRS 16 multiple computed on the same entity's historical figures [20]. Equity analysts who compare post-adoption EV-to-EBITDA multiples against historical pre-adoption benchmarks, or against peers that have not adopted IFRS 16, risk drawing systematically misleading conclusions about relative valuation. The concept of adjusted EBITDA — computed by deducting from reported IFRS 16 EBITDA the sum of right-of-use asset depreciation and lease liability interest, recovering an approximation of the IAS 17-equivalent operating profit figure — is therefore recommended as a supplementary metric for cross-period comparability analysis, despite its absence from primary financial statements. Several of the sample companies provide such adjusted EBITDA figures in their alternative performance measure disclosures or investor presentations, facilitating the construction of consistent time-series for investors willing to engage with this level of disclosure detail.
The implications for regulatory monitoring of systemic risk in the leasing sector are more nuanced. The aggregate increase in reported financial liabilities across the five sample companies, which amounts to approximately PLN 595 million at the transition date — a figure representing less than 1.5 per cent of their combined pre-adoption total financial liabilities — does not, in itself, constitute a signal of genuine systemic leverage expansion, and is correctly interpreted as a consequence of accounting reclassification rather than economic over-indebtedness [19]. However, supervisors and macroprudential analysts who monitor reported leverage ratios across the financial sector without applying explicit adjustments for IFRS 16 effects risk misreading sector-wide leverage trends in the post-2019 period. This concern is compounded by the specific character of leasing company balance sheets: as entities that act simultaneously as lessors — holding substantial portfolios of finance and operating lease receivables as their primary assets — and as lessees — whose own operational commitments now generate additional balance-sheet liabilities under IFRS 16 — leasing companies are subject to a double balance-sheet effect unique to their sector. The lessor-side assets dominate the total asset figure, while the lessee-side IFRS 16 liabilities inflate the reported liability base, creating a distorted leverage picture that overstates genuine financial risk relative to entities in non-leasing sectors [20].
A further consideration for the assessment of financial position relates to the lease modification and reassessment requirements of IFRS 16, which mandate that entities update their right-of-use asset and lease liability measurements whenever there is a change in the lease term, the exercise of a previously excluded extension option, or a modification of contractual payment terms. For the sample entities, the COVID-19 pandemic introduced a wave of rent concessions and temporary payment deferrals during fiscal year 2020, many of which qualified for the practical expedient introduced by the IASB in May 2020 under IFRS 16 paragraph 46A, allowing lessees to account for qualifying COVID-19 rent concessions as variable lease payments rather than as lease modifications. The availability and utilisation of this expedient varied across the sample, introducing a further source of comparability distortion between fiscal year 2019 and fiscal year 2020 financial statements, and is acknowledged as a limitation of the multi-year ratio trajectory analysis presented in this chapter. Notwithstanding this complication, the fundamental conclusion of the empirical analysis holds across the full 2018–2021 study window: IFRS 16 adoption has produced a persistent, directionally consistent, and quantitatively material change in the reported financial ratios of the sample entities, the consequences of which require explicit recognition and analytical adjustment by all categories of financial statement user [20].
- Creditors: Should scrutinise loan documentation for IFRS 16 carve-outs and, where absent, assess the risk of mechanical covenant breach arising from ratio deterioration unconnected to genuine credit deterioration.
- Equity investors: Should construct adjusted EBITDA and EV metrics that restore cross-period and cross-entity comparability, and should interpret post-adoption EV-to-EBITDA multiples in the context of the lease-liability addition to enterprise value.
- Rating analysts: Should verify whether their internal scoring models were updated to incorporate IFRS 16 adjustments concurrent with the 2019 adoption date, and should treat unadjusted reported ratios for leasing companies with particular scepticism given the double balance-sheet effect unique to the sector.
- Regulators and supervisors: Should adjust sector-level leverage monitoring frameworks to isolate the accounting reclassification component of post-2019 liability increases from genuine new-money debt accumulation, and should issue guidance on the correct treatment of IFRS 16 right-of-use liabilities within prudential reporting templates applicable to non-bank financial institutions.
- Management and boards: Should proactively communicate the IFRS 16 impact in investor relations materials, providing reconciliations from IAS 17-equivalent metrics to IFRS 16 reported figures for a minimum of three years post-transition to ensure that market participants have the analytical tools necessary to form informed assessments of entity performance and financial health.
The collective findings of this chapter demonstrate that the financial position reporting of WSE-listed Polish leasing companies has been materially and durably altered by IFRS 16 adoption, in ways that are predictable from the structure of the standard and measurable in the financial statements of the sample entities. The empirical evidence presented confirms the theoretical predictions advanced in Chapters 1 and 2: total assets and total financial liabilities expand upon transition, leverage ratios deteriorate modestly, EBITDA improves artificially, and the magnitude of each effect is determined primarily by the scale and duration of each entity's own operating lease portfolio as lessee rather than by any change in the economic substance of its business. These findings carry significant implications for the accuracy and utility of conventional ratio-based financial analysis in the post-IFRS 16 reporting environment, and reinforce the conclusion — developed in the thesis conclusion — that stakeholders must develop and apply adjusted analytical frameworks when interpreting the financial statements of leasing sector entities in the period following the mandatory adoption of the standard [19] [20].
Conclusion
The present thesis was undertaken with the purpose of investigating the impact of IFRS 16 Leases implementation on the financial position of leasing companies listed on the Warsaw Stock Exchange, with particular reference to the balance-sheet enlargement, leverage ratio deterioration, and earnings metric distortion attributable to the mandatory on-balance-sheet recognition of right-of-use assets and corresponding lease liabilities from the standard's effective date of 1 January 2019. The research question guiding the inquiry was framed as follows: to what extent, and through what specific mechanisms, did the adoption of IFRS 16 alter the reported financial position of Polish listed leasing companies, and what implications do these alterations carry for the accuracy and utility of conventional ratio-based financial analysis applied to entities in this sector? The three chapters of the thesis addressed this question through a progressively focused sequence of investigation — from the theoretical and historical foundations of lease accounting reform, through the institutional and regulatory context of the Polish leasing market, to the empirical quantification of balance-sheet and ratio effects across a purposively selected sample of Warsaw Stock Exchange-listed leasing entities. The conclusions that emerge from this integrated analysis are both substantive and practically significant, confirming the central hypothesis that IFRS 16 materially transformed the presentation of financial position for entities in the Polish leasing sector without altering the economic substance of their operations.
The theoretical analysis presented in Chapter 1 established the intellectual lineage of the IFRS 16 reform and demonstrated that the standard's recognition model represented the culmination of a decades-long process of standard-setter dissatisfaction with the classification-based approach enshrined in its predecessor, IAS 17 Accounting for Leases. The dual-classification model under IAS 17, which distinguished finance leases from operating leases on the basis of risks-and-rewards transfer criteria, was shown to have generated systematic off-balance-sheet treatment for the overwhelming majority of lessee obligations, enabling entities to structure leasing transactions in ways that kept substantial financial liabilities outside the face of the balance sheet. The joint IASB–FASB project that produced IFRS 16 adopted a fundamentally different conceptual approach, grounding lessee accounting in the right-of-use asset model and thereby eliminating the operating lease classification for most lessee contracts. The measurement framework established by the standard — requiring the initial recognition of the lease liability at the present value of future lease payments discounted at the incremental borrowing rate, and the corresponding right-of-use asset at the same amount adjusted for initial direct costs and lease incentives — was examined in detail, together with the subsequent measurement mechanics governing depreciation of the right-of-use asset and the effective-interest unwind of the lease liability. The theoretical chapter further identified the predictable directional effects of this recognition model on key financial ratios, establishing the analytical framework subsequently applied in the empirical investigation: total assets increase, total financial liabilities increase proportionately or more, equity is unaffected at transition under the modified retrospective method, EBITDA rises because lease payments previously classified as operating costs are reclassified as depreciation and interest charges falling below the EBITDA line, and leverage ratios such as net debt to EBITDA and debt-to-equity deteriorate in the period immediately following adoption.
Chapter 2 contextualised these theoretical predictions within the specific institutional and market environment of the Polish leasing sector, tracing the development of the industry from its origins in the post-transformation period of the early 1990s through its emergence as one of the most dynamic leasing markets in Central and Eastern Europe. The regulatory evolution of the Polish leasing market — encompassing the codification of leasing as a nominate contract in 2001, the harmonisation of accounting and tax treatment following European Union accession in 2004, and the successive amendments to tax legislation affecting the deductibility of lease payments — was examined as essential background for understanding the financial reporting environment within which IFRS 16 adoption occurred. The Warsaw Stock Exchange listing landscape for leasing entities was mapped, with particular attention to the structural characteristic that distinguishes Polish listed leasing companies from typical lessees in other sectors: these entities are simultaneously lessors — deriving their primary revenue from the origination and management of lease portfolios — and lessees, holding operating leases over office premises, information technology infrastructure, and vehicle fleets used in their own operations. This dual role means that IFRS 16 affected their financial statements on both sides of the balance sheet, creating a compounding effect on reported leverage that is unique to professional leasing intermediaries and that must be carefully distinguished from the effects experienced by entities in other sectors where only the lessee dimension of the standard is operative. The transition mechanics examined in Chapter 2, including the choice between the full retrospective and modified retrospective methods and the practical expedients available under the standard, were shown to have influenced the magnitude of transition-date balance-sheet effects across the sampled entities, with those adopting the modified retrospective approach without the practical expedient of treating the right-of-use asset as equal to the lease liability reporting larger transition-date equity adjustments.
The empirical analysis in Chapter 3 provided direct quantitative evidence in response to the central research question. Across the sample of five WSE-listed leasing companies examined — comprising the leasing subsidiaries of PKO Bank Polski, Bank Pekao, mBank, ING Bank Śląski, and Getin Noble Bank — the adoption of IFRS 16 produced statistically measurable and economically material changes in reported financial position. Total assets increased across the sample by a magnitude consistent with the scale of each entity's operating lease portfolio as lessee, with the increase ranging from approximately three to eight per cent of pre-adoption total assets depending on the entity's leasehold intensity. Total financial liabilities increased by broadly corresponding amounts, with the precise ratio of liability increase to asset increase varying according to the practical expedient elections made at transition. Reported EBITDA improved for all sample entities in the first post-adoption reporting period, reflecting the reclassification of operating lease payments from above-EBITDA operating expenses to below-EBITDA depreciation and interest charges; however, this improvement was confirmed to be purely presentational in character, carrying no implication of genuine operational improvement. The net debt to EBITDA ratio deteriorated for all sample entities when measured on the basis of unadjusted reported figures, notwithstanding the EBITDA improvement, because the increase in financial liabilities outweighed the EBITDA uplift in proportional terms. The empirical findings thus confirmed the directional predictions generated by the theoretical framework in Chapter 1 and provided Polish-market-specific quantification of effects previously documented in broader international studies.
The principal theoretical contribution of this thesis lies in its application and extension of the international IFRS 16 impact literature to the specific context of professional leasing companies listed on an emerging-market stock exchange. Prior empirical research on IFRS 16 effects has predominantly focused on lessees in the retail, aviation, and hospitality sectors, where the standard's impact is concentrated on the lessee dimension and where the lessor dimension is absent. The analysis presented in this thesis demonstrates that the double balance-sheet effect — arising from the simultaneous operation of lessor and lessee accounting — creates a qualitatively distinct pattern of financial position transformation for professional leasing intermediaries, one that is insufficiently captured by general frameworks derived from single-role lessee studies. The thesis further contributes to the emerging literature on the interaction between IFRS 16 and financial covenant structures in Central and Eastern European credit markets, an area that has received limited scholarly attention despite the practical importance of covenant-based lending to Polish corporate borrowers. By documenting the renegotiation pressures and covenant amendment processes experienced by sample entities following IFRS 16 adoption, the empirical analysis provides evidence that the standard's balance-sheet effects carried real economic consequences for the cost and terms of borrowing, contradicting the IASB's expressed view that any such effects would be transitory and beneficial.
The practical implications of the research extend across multiple categories of financial statement user. For equity investors and equity analysts, the findings reinforce the necessity of constructing IFRS 16-adjusted financial metrics when comparing the performance and valuation of leasing sector entities across periods straddling the 2019 adoption date, and when comparing Polish leasing companies with peers in jurisdictions that adopted IFRS 16 at different times or with materially different practical expedient elections. The artificial EBITDA improvement and the mechanical leverage deterioration documented in the empirical analysis create significant risks of analytical error for users who apply unadjusted reported figures directly to standard valuation frameworks such as enterprise value to EBITDA multiples or debt-capacity assessment ratios. For creditors, the research highlights the importance of incorporating IFRS 16 carve-outs into loan covenant documentation for leasing sector borrowers, and of adjusting the credit assessment process to distinguish between accounting-driven liability increases and genuine new-money debt accumulation. For regulators and supervisory authorities, the documented scale of balance-sheet transformation across the sample suggests that sector-level leverage monitoring frameworks applicable to non-bank financial institutions should be recalibrated to account for the accounting reclassification component of post-2019 liability levels, in order to avoid the misallocation of regulatory attention toward entities whose apparent leverage deterioration is attributable entirely to presentational change rather than genuine financial stress.
For the management and boards of listed leasing companies, the research findings reinforce the importance of proactive and sustained investor relations communication regarding the IFRS 16 impact. The empirical evidence indicates that the balance-sheet and ratio effects of IFRS 16 adoption persist across multiple reporting periods and do not diminish progressively as the post-adoption financial statements become the established reference base, because the standard requires ongoing remeasurement of lease liabilities and right-of-use assets at each reporting date, creating a continuing source of balance-sheet volatility absent under IAS 17. Management teams that provide comprehensive reconciliations from IAS 17-equivalent metrics to IFRS 16 reported figures in their financial reporting and investor relations materials significantly reduce the risk of market mispricing and analyst error, and thereby serve the interests of both existing and prospective shareholders. The failure to provide such reconciliations — a practice documented for a subset of sample entities in the early post-adoption periods examined in Chapter 3 — creates informational asymmetry between management and the investment community that may impair the efficiency of equity pricing in the affected securities.
The limitations of the present research must be acknowledged candidly. The sample of five entities, while representing all primary pure-play leasing entities listed on the Warsaw Stock Exchange Main Market at the relevant date, is small in absolute terms and precludes the application of inferential statistical methods that would require larger cross-sectional samples. The conclusions drawn from the empirical analysis are accordingly descriptive and interpretive rather than inferential, and caution is warranted in generalising from the observed effects to the broader population of IFRS 16 adopters in the Polish or regional market. A second limitation arises from the confounding effects of concurrent macroeconomic and sector-specific developments during the 2018–2020 observation window, including the prolonged low-interest-rate environment that influenced incremental borrowing rates used to discount lease liabilities, the rapid growth of the Polish leasing market in the pre-transition period, and the initial impacts of the COVID-19 pandemic on business activity and asset values in the early months of 2020. While the analytical design sought to isolate the accounting-driven effects of IFRS 16 from these concurrent developments, the degree to which the observed balance-sheet changes reflect pure accounting reclassification versus genuine operational change cannot be established with certainty from publicly available financial statement data alone. A third limitation relates to the reliance on published consolidated financial statements as the primary data source, which constrains the analysis to information disclosed by the reporting entities under IFRS requirements and precludes the use of contract-level lease data that would enable a more granular assessment of the composition and characteristics of the underlying lease portfolios giving rise to the recognised right-of-use assets and lease liabilities.
Several directions for future research emerge naturally from the limitations identified above and from the findings of the empirical analysis. First, the expansion of the sample to include leasing companies listed on other Central and Eastern European stock exchanges — including the Prague, Budapest, and Bucharest markets — would enable a regional comparative analysis of IFRS 16 effects across markets with similar transition histories but potentially different leasing sector structures and credit market characteristics. Such a regional study would provide a richer empirical basis for understanding the determinants of cross-entity variation in IFRS 16 balance-sheet effects and would permit the application of multivariate regression methods to isolate the contribution of entity-specific factors such as portfolio duration, operating lease intensity, and credit quality to the observed magnitude of transition effects. Second, a longitudinal extension of the present analysis to cover the period 2021–2025 would enable investigation of whether the initial balance-sheet effects of IFRS 16 adoption have moderated or intensified as the standard's ongoing measurement requirements have interacted with changes in the macroeconomic environment — including the significant interest rate increases of 2022–2023, which would be expected to increase the incremental borrowing rates applied in lease liability discounting and thereby affect the carrying amounts of lease liabilities for contracts entered into or reassessed in that period. Third, the development and empirical validation of a standardised analytical framework for adjusting the financial statements of professional leasing intermediaries to eliminate the double balance-sheet effect of IFRS 16 — and thereby restore comparability with pre-adoption periods and with entities reporting under accounting frameworks that do not incorporate equivalent requirements — would make a significant practical contribution to the financial analysis literature and to the investment community's capacity to evaluate leasing sector equities accurately.
In summary, the research presented in this thesis demonstrates that the implementation of IFRS 16 materially transformed the reported financial position of leasing companies listed on the Warsaw Stock Exchange, producing balance-sheet expansion and leverage ratio deterioration of a magnitude that, while predictable from the theoretical structure of the standard, carries significant practical implications for the accuracy of conventional financial analysis applied to entities in this sector. The effects documented are primarily presentational in character, reflecting the reclassification of economic obligations that existed prior to the standard's adoption rather than the creation of new financial liabilities, and they must therefore be interpreted with analytical care by all categories of financial statement user. The thesis has established that the Polish listed leasing sector provides a particularly instructive case for examining IFRS 16 effects, because the dual lessor-and-lessee role of professional leasing intermediaries creates a compounding balance-sheet transformation absent in studies focused on single-role lessees. The body of evidence assembled and analysed in this research supports the conclusion that standard-setters, regulators, investors, and management teams must each develop and apply adjusted analytical frameworks when engaging with the financial statements of leasing sector entities in the post-IFRS 16 reporting environment, and that the academic and professional communities have a shared responsibility to develop the methodological tools necessary to support informed and accurate financial analysis in this transformed reporting landscape.