Assessment of the financial condition of the borrower - leasing company (Shatalova E.P.)

Date the article was posted: 12/17/2014

Currently, leasing has reached a high level of development in the domestic market, emerging as an independent branch of business. A number of companies, including large ones, are successfully operating in the field of providing financial leasing services. Leasing companies are assigned ratings: in particular, companies in the Russian leasing market are assessed by the Expert RA rating agency. How to take into account the industry characteristics of a borrower whose business is the provision of financial leasing (leasing) services? The article proposes a methodology for assessing the level of the financial condition of a leasing company.

The specificity of the leasing companies' activities involves the attraction of medium and long-term financing. This creates an unambiguous prerequisite for their interest in using bank loans, in connection with which leasing companies become loyal bank borrowers.
As a rule, the terms for granting loans to leasing companies are from three to five years, and the schedules of partial repayment of loans correspond to similar parameters of the leasing agreements concluded by the borrower with the lessees.
As collateral for loans, the leasing bank is most often provided as collateral for leasing objects, as well as rights of claim against lessees under lease agreements.
The source of repayment of the principal debt and accrued interest on loans is funds received from lessees in accordance with the lease payment schedules.
The range of leasing transactions is very wide and covers:
- production equipment and machinery;
- road maintenance machinery and equipment;
- road construction equipment;
- cars and trucks;
- aeronautical and airport equipment;
- aviation equipment;
- sea and river vessels of various classes, port equipment;
- equipment for special purposes;
- integrated security systems;
- containers for the carriage of goods.
Large leasing companies can implement complex projects, including those related to the lengthy process of creating a leased asset. As a rule, in such cases, they actively cooperate with government departments, departments and agencies, state corporations. State support allows large leasing companies to develop relevant programs, accompany government initiatives and actively participate in the development of the country's economy.
Lessees are enterprises from various sectors of the economy:
- manufacturing enterprises;
- local and regional road sector enterprises;
- regional and federal airports, regional carriers, etc .;
- motor transport enterprises.
Leasing companies offer modern domestic and imported machinery and equipment from leading manufacturers. Partnerships with banks allow leasing companies to offer their clients the most flexible loan terms and provide guarantees.
At the same time, the specifics of the leasing business should be taken into account when conducting credit analysis, especially when assessing the level of the financial condition of a leasing company.

Transformation of financial statements of a leasing company

The most important feature of the proposed methodological approach to assessing the financial condition of a borrower - a leasing company, is that a credit analyst, taking as a basis a standardized method of financial analysis, must first transform the leasing company's reporting. The purpose of such a transformation is a more accurate reflection of balance sheet items in accordance with their economic content.
A standardized methodology for assessing the level of a borrower's financial condition involves the use of a system of financial ratios, consisting of five groups of indicators:
- financial leverage ratios (characterizing the ratio of equity and debt capital);
- turnover ratios (allowing to assess the intensity of the business cycle);
- profitability ratios (characterizing the efficiency of equity and borrowed capital);
- liquidity ratios (characterizing the ability to pay off your obligations);
- the quality of debt service (defined as the ratio of proceeds from sales to debt to banks and creditors for short-term and long-term obligations).
After calculating the values ​​of financial ratios to establish the level of financial risk for each of the indicators (groups of financial ratios), the percentage of the total of the scores is calculated, taking into account the weight coefficients in relation to their maximum possible number, which can be placed on the rating scale in the form of a table of distribution of the indicated percentages (Table 1).

Table 1

Financial risk levels

The accounting transformation applied to leasing companies should take into account the following key point. The leased property is considered by the bank as an element of the leasing company's working capital structure. In this regard, to assess the level of the financial position of the borrower, the bank transfers the amount of investments in property transferred to financial leasing from the section "Profitable investments in tangible assets" of non-current assets (section I of the balance sheet) to the section "Financial investments (excluding cash equivalents) "current assets (section II of the balance sheet).
The current assets of the leasing company are mainly represented by the following items:
- accounts receivable (debts of lessees - balance holders of leased items, buyers' debts, advances paid to suppliers, calculations of taxes and fees);
- deposits with credit institutions;
- cash (balances on current accounts in banks);
- other current assets (VAT on advances received, prepaid expenses (insurance premium)).
The liabilities of the leasing company contain the following main items:
1) own funds: authorized capital, retained earnings, reserve capital, deferred income under lease agreements. The share of equity capital in the structure of funding sources is about 30% of the balance sheet total (the level of autonomy is assessed as high);
2) liabilities of the leasing company (about 70% of the balance sheet total):
- long-term and short-term loans;
- other long-term liabilities: advances received under lease agreements, arrears on payment of insurance premiums, deferred tax liabilities (VAT);
- accounts payable, including advances from buyers, advances received under lease agreements, indebtedness for payment of insurance premiums, taxes and fees.
There are the following positive signs indicating the success of the leasing company's business.
1. The value of net assets is increasing.
2. The borrower does not have a deficit of its own working capital (in this case, it is necessary to take into account the specifics of the lessor's activities, namely, the fact that profitable investments in tangible assets - leased items - are incorrectly attributed to immobilized assets, since at the end of the lease term (the corresponding loan agreement ) leased objects are purchased by lessees (depreciated)).
3. The borrower is moderately dependent on external sources of financing and finances its activities with its own funds for about 30%, as well as through long-term and short-term bank borrowings.
4. The borrower's liquidity is respected, the company has the potential to timely settle its obligations through the sale (turnover) of assets.
5. The financial result of the borrower's activity is profit.
6. The borrower has an optimal debt burden. In terms of terms and volumes, bank borrowings within the framework of each loan project are coordinated (correspond) with similar parameters (terms and amounts) of leasing agreements.
7. Indicators of the borrower's asset turnover correspond to the payback periods of leasing projects.

Example. The financial position of the borrower - the leasing company.

table 2

Table 3

Statement of financial results for January - December 2013 (thousand rubles)

Organization "Leasing company"
Economic activity - financial leasing

Analysis of the borrower's activities during the year (from January 1, 2013 to January 1, 2014) indicates a continuing high level of financial condition, an increase of 1.8 times - from 17,411 to 32,126 million rubles. - the amount of net assets (the level of the borrower's autonomy), an increase in the balance sheet by 50% - from 65.2 to 97.9 billion rubles, an increase in the borrower's annual revenue by 30% - from 12.7 to 16.4 billion rubles.
The borrower's assets are 32% (RUB 31 billion) represented by non-current assets, in the structure of which profitable investments in tangible assets (leased property, including depreciation) amount to RUB 28,471.6 million. The leased property is considered by the bank as an element of the leasing company's working capital structure, and therefore, in order to assess the level of the borrower's financial position, the bank made the following transformation of the borrower's asset structure: investments in tangible assets of "non-current assets (section I of the balance sheet) in the section" Financial investments (excluding cash equivalents) "of current assets (section II of the balance sheet).
Current assets are represented by:
- accounts receivable in the amount of RUB 57,110 million. (debts of lessees - balance holders of leased items, buyers' debts, advances paid to suppliers, calculations of taxes and fees). During 2013, the borrower created a reserve for doubtful debts (problem receivables) in the amount of RUB 391.8 million, or approximately 1.1% of the lessees' debt incurred in 2013;
- deposits in credit institutions in the amount of 2 million rubles. (2% of the balance sheet currency);
- cash (balances on settlement accounts with banks in the amount of RUB 4,266 million (4.3% of the balance sheet total));
- other current assets (VAT on advances received, prepaid expenses (insurance premium) in the amount of RUB 1,195 million).
In the structure of the borrower's liabilities - own funds: authorized capital - 10,001 million rubles, retained earnings - 701.6 million rubles, reserve capital - 61.8 million rubles; the borrower's own funds included deferred income under lease agreements in the amount of RUB 21,362 million. The share of equity capital in the structure of funding sources is 29,560 million rubles, or about 30% of the balance sheet total (the level of autonomy is assessed as quite high).
Liabilities - 69.8% of the balance sheet total, or 68,370 million rubles:
- long-term loans in the amount of RUB 47,999 million, short-term loans, interest on them, promissory notes and bonds in the amount of RUB 5,812 million;
- other long-term liabilities: advances received under leasing agreements in the amount of RUR 856 million, indebtedness for payment of insurance premiums in the amount of RUR 355 million, deferred tax liabilities (VAT) in the amount of RUR 6663 million;
- accounts payable in the amount of RUB 2,735 million, including advances from buyers, advances received under lease agreements, indebtedness for payment of insurance premiums, taxes and fees.
Based on the analysis of financial risk factors as of January 1, 2014, as well as their dynamics during the year, the following was revealed.
The value of net assets increased in 2013 in absolute terms by 84.5% - from 17,411 to 32,127 million rubles, their share in total assets increased from 26.7 to 32.8%. The borrower does not have a deficit of its own working capital (in this case, it is necessary to take into account the specifics of the lessor's activities, namely the fact that profitable investments in material assets - leased items - in the amount of 28,472 million rubles. Is incorrect to refer to immobilized assets, since at the end of the term lease (corresponding credit agreement) leasing objects are purchased by lessees (amortized)).
The borrower is moderately dependent on external sources of financing and finances its activities with its own funds by 30%, as well as through long-term (47.9 billion rubles) and short-term (5.8 billion rubles) bank borrowings, the share of which in the structure liabilities as of January 1, 2014 amounted to 54.9%.
The borrower's liquidity is respected, the company has the potential to timely settle its obligations through the sale (turnover) of assets.
The financial result of the borrower's activity during the considered period is profit. During 2013, the received profit amounted to 317 million rubles, having increased in comparison with the same indicator in 2012 by 2.4 times.
The borrower has an optimal debt burden. In terms of terms and volumes, bank borrowings within the framework of each loan project are coordinated with similar parameters (terms and amounts) of leasing agreements. In this aspect, it is necessary to take into account the low share of problematic claims for collection, which is about 1% of the borrower's leasing portfolio.
The indicators of the borrower's asset turnover correspond to the payback periods of leasing projects. The structure of the balance sheet is typical for the lessor.
The level of financial risk is assessed as low. The financial position of the borrower as of January 1, 2014 is assessed as good.

conclusions

A key feature of the credit analysis of leasing companies, which are characterized by a pronounced industry specificity, is the preliminary transformation of the lessor's financial statements, through which the credit analyst takes into account the specifics of the client's business, as well as taking into account the specifics of financial leases.
Transformation of the reporting of a borrower - a leasing company consists in transferring the amount of investments in property transferred under financial lease from the section "Income investments in tangible assets" as part of non-current assets to the section "Financial investments (excluding cash equivalents)" as part of current assets. After the transformation of the financial statements, through which the industry characteristics of the leasing company will be taken into account, a standardized methodology for analyzing the financial statements of a bank client is applied, which makes it possible to assess the level of financial risk and determine the financial position of the borrower.

Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

Similar documents

Leasing as a recognized means of financing capital investments. Leasing market management. Founders of leasing companies. Creation of associations of leasing companies on a voluntary basis. Features of the leasing agreement in the Republic of Belarus.

test, added 03/21/2009


Essence, types, objects and subjects of leasing, its advantages and disadvantages. Economic and organizational characteristics of the enterprise. Analysis of the use of equipment received on lease. Comparative assessment of leasing operations and credit transactions.

term paper added 12/16/2014


Research of theoretical aspects of conducting and analyzing leasing operations. Features of financial and operational leasing. Schemes of leasing operations and methods of their analysis at the enterprise, the use of equipment and ways to improve efficiency.

term paper, added 03/05/2011


The essence and necessity of updating the technical base of production. Features of the use of leasing relations in modern conditions. Types of leasing, improving leasing relations, methods of insuring portfolio risks of leasing companies.

term paper, added 01/21/2011


The concept of leasing, its advantages over a loan. Disadvantages of a leasing operation. Rating of leasing companies. Entrepreneurship in the leasing market. The share of transactions with small, medium and large businesses in the total number of current transactions.

abstract, added 02/25/2009


The essence of leasing, its theoretical foundations and types. The main participants in leasing operations. Leasing types. The main differences between leasing and credit. Problems and disadvantages of leasing relations. Foreign experience in leasing relations. Leasing in Ukraine.

term paper added on 12/02/2006


Organization of leasing operations and their economic essence. Objects and subjects of leasing. Types and mechanism of leasing transactions, their legal support. Evaluation of savings from cost reduction, the payback period of capital investments and scientific and technical progress.

term paper added 04/12/2016

Introduction
1. The theoretical aspect of studying the commercial activities of leasing companies
1.1. Leasing as an economic category
1.2. The specifics of the organization of processes of leasing companies
2. Analysis of the commercial activity of a leasing company on the example of LLC "Alfa-Leasing"
2.1. Company profile
2.2. Analysis of the commercial activities of the company
3. Recommendations for improving the commercial activities of the leasing company
Conclusion
Bibliography
Application

The inclusion of Russia in the global economic processes requires an increase in its competitiveness, both in the domestic and international markets.
The level of competitiveness of Russian companies depends entirely on the pace of organizing new production facilities that meet modern and future market needs, using the latest achievements of science and technology and, therefore, is closely related to the renewal of fixed assets of enterprises, their modernization on a new technological basis and ultimately depends on provision of enterprises with equipment in the required quantity and range. The intensification of investment activity in the real sector of the economy and its efficiency remain one of the main problems in Russia. Even large enterprises clearly do not have enough own funds for the implementation of most investment projects, and even more so for small and medium-sized ones.
The necessary transformations in industry are largely limited not so much by the ability of enterprises to use borrowed funds, a lack of capital, its leakage abroad, but also by the low efficiency of project implementation, the lack of strict control over the targeted use of funds.
For the successful development of investment processes in industry, the forms of investment operating in Russia should be actively supplemented by financial mechanisms that ensure the consolidation of cash flows in the real sector of the economy and their efficiency. One of these tools is leasing. In countries with market economies, leasing has been successfully developing for a long time; at present, some Russian experience in this direction can be assessed. Examples of contracts similar in nature to leasing are found already in ancient history, although, of course, as a modern financial instrument, leasing developed in the second half of the 20th century, spreading from the United States to other countries.
Leasing activity is a complex socio-economic phenomenon that performs a number of important tasks in the formation and development of the main sectors of the country's economy, contributes to the activation of investment processes. In countries with market economies, a significant part of all investment is investment related to leasing. Any business entity applies to leasing, regardless of the field of activity, form of ownership, size, level of development, financial situation. On the other hand, legal entities and individuals are actively investing free financial resources in the creation of leasing schemes.
Leasing is one of the most widespread types of activity; its scale is increasing every year. This is primarily due to the fact that in the context of the rapid development of new types of technologies, the change of its generations, the use of the potential of leasing transactions allows you to quickly update the technical base of production and systematically make investments.
A large number of monographs and articles in periodicals are devoted to the formation of leasing relations in the Russian economy. The theoretical and methodological foundations of the organization of leasing were considered in the scientific works of domestic scientists: V.D. Gazman, T.G. Filosofova, L.N. Prilutskiy, N.M. Vasiliev, S.N. Katyrina, L.N. Lepe, A. V. Goremykina, V. M. Dzhukha, S. L. Kovyneva, T. A. Kraseva, Yu. Lapygina, E.M. Chetyrkina, E.V. Sokolskikh, M.I. Leshchenko, E.N. Chekmareva and others, as well as foreign authors.
The object of research is commercial activity.
The subject of the research is the commercial activities of leasing companies.
Objects of observation - LLC "Alfa-Leasing"
The purpose of the work is to analyze the commercial activities of leasing companies.
Tasks:
1. Consider leasing as an economic category.
2. To study the specifics of the organization of the processes of leasing companies.
3. To analyze the commercial activities of a leasing company using the example of LLC Alfa-Leasing.
4. Formulate recommendations for improving the commercial activities of the leasing company.

1. Antoshina, O. A. Risks of economic activity of a leasing company / O.A. Antoshina // Management of economic systems: electronic scientific journal. - 2014. - No. 5 (65). - S. 18.
2. Bazhenov, V.I. Assessment of liquidity and solvency of the leasing company / V.I. Bazhenova // Innovative development of the economy. - 2012. - No. 5 (11). - S. 74-78.
3. Volodin, A. A. Financial management (enterprise finance): Textbook / A.A. Volodin. - M .: Infra-M, 2006 .-- 685 p.
4. Gazman, VD Leasing: financing and securitization: textbook. manual for universities / V. D. Gazman. - M .: Ed. House of the Higher School of Economics, 2011. - 469 p.
5. Gordienko, T. Formation of the financial structure of the leasing company / T. Gordienko // Bulletin of the Kiev National Trade and Economic University. - 2009. - No. 3 (65). - S. 61-68.
6. Goremykin, V.A. Leasing: Textbook / V.A. Goremykin. - M .: Filin, 2009 .-- 944 p.
7. Dmitriev A. Modern development of leasing activities in the Russian Federation / A. Dmitriev, A. Kleimenov // Transport business of Russia. - 2013. - No. 1. - S. 155-157.
8. Zmanovskaya, M.A. Comprehensive assessment of the effectiveness of clusters for leasing companies / M.A. Zmanovskaya // Science and Modernity. - 2011. - No. 13-3. - S. 133-138.
9. Ibragimov, Kh.A. Management accounting in leasing companies / Kh.A. Ibragimov // Bulletin of the Dagestan State University. - 2011. - No. 5. - S. 153-157.
10. Ivanova, Yu.N. Balanced system of indicators of a leasing company / Yu.N. Ivanova, L.A. Zhukova // Theory and practice of service: economics, social sphere, technologies. - 2011. - No. 2 (8). - S. 133-141.
11. Kachanova A.A. Trends in the development of leasing activities in Russia / A.A. Kachanova, A.V. Alekseeva // Nauka-Rastudent. - 2014. - No. 5 (05). - S. 6.
12. Kerina E.N. Leasing activity in the Russian Federation: factors that determine the cost of leasing / E.N. Kerina, E.V. Chikishev // Proceedings of the Bratsk State University. Series: Natural and Engineering Sciences. - 2013. - T. 2. - S. 89-92.
13. Kirillov, A.A. Legal basis for leasing: textbook.-Practical. manual / A.A. Krillov. - M .: Yustitsinform, 2009 .-- 112 p.
14. Kovalev, V.V. Leasing: financial, accounting, analytical and legal aspects: training and practice. allowance / V.V. Kovalev. - M .: Prospect, 2011 .-- 448 p.
15. Mishin, A.Yu. Improvement of business processes as a key factor in the success of Russian leasing companies / A.Yu. Mishin // Management sciences in modern Russia. - 2014. - T. 2. - No. 2. - S. 410-413.
16. Nikitina, M.Yu. The effectiveness of the creation of a leasing company under the conditions of the Customs Union / M.Yu. Nikitina // Economics and Management: Analysis of Trends and Development Prospects. - 2012. - No. 2-1. - S. 141-144.
17. Boys, S.V. Development of the branch network of a leasing company as the main way to conquer regional markets for leasing services. Boys // Bulletin of the Volgograd State Technical University. - 2009. - T. 5. - No. 9. - S. 68-70.
18. Skylights, G.I. Leasing: tasks and solutions: Study guide / G.I. Clearances. - M .: Alfa-Press, 2008 .-- 160 p.
19. Smekalov, P. V. Organization of accounting and analysis of leasing transactions at agricultural enterprises: a tutorial / P. V. Smekalov, E. Ch. Tsydenova, S. V. Smolyaninov. - SPb .: Prospekt Nauki, 2010 .-- 208 p.
20. Lists of the largest leasing companies // Expert-online [Electronic resource] URL: http://www.raexpert.ru/ratings/leasing/ (date of treatment 12.23.4)
21. Trifonova, E.M. The composition of the cash flows of the leasing company / Е.М. Trifonova // Modern Economics: Problems, Trends, Prospects. - 2011. - No. 4. - P. 36-40.
22. Filosofova, T.G. Leasing: textbook. manual for university students studying in economics and management / T.G. Filosofova. - 3rd ed., Rev. and add. - M .: UNITI-DANA, 2008 .-- 191 p.
23. Khizirieva, D.I. Advantages and distinctive features of a leasing transaction / D.I. Khizirieva // Law and Economics. - 2009. - No. 8. - S. 30-36.
24. Shaposhnikov, I.G. Development of non-bank credit institutions in Russia / I.G. Shaposhnikov // Fundamental research. - 2014. - No. 8-5. - S. 1153-1157.
25. Shakhovskaya, L.S. Marketing tools for increasing the competitiveness of a leasing company / L.S. Shakhovskaya, S.V. Boys // Bulletin of the Volgograd State University. Series 3: Economics. Ecology. - 2008. - No. 2. - S. 69-73.

Is this job inappropriate?

If this work did not suit you, you can order help from our experts.
Place an order and find out the cost of assistance for your work in the near future! It's free!

×

Buy work

Amount to be paid: rub.

To buy a finished work, enter your mail,
the work you bought will be sent to it.

Sergey Kalinin Credit Analyst of the Risk Management Department

Daniil Amambaev Credit Analyst of the Risk Management Department
REGION Group of Companies

Information and analytical magazine "Territory of Leasing" No. 2 for 2013

For the first time, leasing companies entered the Russian bond market in 2001. The pioneer role was played by the then leading market leader RTK-Leasing, a captive company OJSC Rostelecom, whose financial performance was better than the industry average. The company managed to place a bond issue of RUB 500 million by open subscription.

Current state of the bond market for leasing companies

Since 2001, there has been a noticeable increase in the volume of the bond market of leasing companies (Fig. 1)

However, comparing the levels of development of the leasing business in Russia and the market for debt securities of companies in this segment, we can confidently state the inadequacy of the latter.

The share of funds received from the placement of bonds in the total resource base of leasing companies is about 5%. In the markets of the USA, Canada, Western Europe, this figure is much higher - 12-15%.

Today, Russia has 70 issues of debt securities of leasing companies in circulation, and since the birth of this market, 32 issues have been redeemed in our country, 6 issues have been canceled, and the issuer defaulted on four more.

Another quantitative aspect is also important: only 5% of the total number of operating leasing companies decided to issue bonds. Among them, 80% of the volume of placed securities is accounted for by VEB-Leasing, VTB Leasing, TransFin-M and URALSIB Leasing Company, the remaining 20% ​​- by another 10 companies (Fig. 2). The average circulation period of the issues is 5.1 years.

Key aspects of issuing debt securities by leasing companies

The primary, and perhaps most significant, goal of debt issuance by leasing companies is to increase flexibility and agility. In the case of credit financing, lease payments must be strictly synchronized with the repayment of the principal debt of the loan and interest, and the terms for transactions must be comparable to funding. When entering the organized debt markets, the need for synchronization disappears.

The company, having received 3-5-year resources from the bond placement, has a certain "freedom" to choose the term of the agreement, as well as approaches to assessing the credit intensity and solvency of a potential lessee, since there is no need to evaluate the project by the bank lending the transaction. This makes it possible to shorten the period for considering the project and making a decision on it.

An important aspect is the cost of resources. For credit funds, it is often higher than the yield on bonds. Thus, leasing companies have the opportunity to either increase their marginal income or place more profitable offers on the market, not to mention the fact that more expensive loans can be refinanced with resources from bonded loans. Another degree of freedom is that the leased property will not be encumbered with bank pledges.

Difficulties in entering the public debt market for leasing companies

But there are a number of significant obstacles on the way of a leasing company to the public borrowing market. First, preparing a bond issue requires certain knowledge, skills, qualified specialists and administrative resources. Secondly, when entering the public debt market, it is necessary to demonstrate a high degree of transparency, disclosing not only reporting data, but also the volume and quality of the leasing portfolio, which is often one of the main constraints.

In addition, when evaluating a company, potential investors do not ignore the indicators of the level of equity capital and the volume of the leasing portfolio, the quality of risk management, the focus of the business, and the position in the industry.

Leasing company valuation standards

Due to the complex specifics of the business, it is more problematic to objectively evaluate a leasing company than other participants in the debt market. And if the qualitative indicators of its activities are more or less "available" to investors, then with the quantitative ones, certain difficulties arise.

First of all, this is due to the imperfection in the regulation of the reflection of current activities in reporting documents. Difficulties in assessing arise due to the fact that there are several different types of leasing, respectively, and the variety in the way leasing transactions are displayed in the company's financial statements under IFRS, GAAP (USA) and especially RAS. IFRS and RAS have qualitative differences both in terms of disclosing financial information of leasing companies and in the financial settlement system.

In the RAS standard, the structure of balance sheet items is determined in accordance with the terms of the lease agreement and the asset holder, which can be both the lessor and the lessee. In fact, the balance sheet according to Russian standards does not reflect what is happening and does not give a real picture of the company's activities in this market. The main problem of leasing companies' reports according to RAS is non-disclosure of the structure of the leasing portfolio, its credit and market quality, liquidity and the volume of overdue payments. It should be noted that there is no separate PBU that would regulate accounting in leasing companies.

As for IFRS, IAS 17 “Leases” fully provides the necessary data. Unlike RAS, leased property can only be reflected on the lessee's balance sheet. The structure of international reporting allows you to see a wide range of indicators. So, for example, among the assets of a leasing company, one can highlight the item "Net investment in leasing" (NIL), which shows the present value of future lease payments. The financial statements disclose information about the credit quality of the portfolio, accounts receivable and late payments. Reporting based on international standards is more informative and allows for a more objective assessment of the company.

However, only 24 companies in Russia prepare audited financial statements in accordance with IFRS standards, and only eight companies - leaders in this business - publish them. The unpopularity of IFRS reporting is due to the unwillingness to disclose the real financial condition of companies and the additional costs associated with its preparation. At the same time, this behavior of Russian leasing companies is largely due to the fact that today they are focused primarily on credit resources on the domestic market.

However, serious progress in this matter is possible in the near future. In accordance with the Plan of the Ministry of Finance of the Russian Federation for the development of accounting and reporting in our country for 2012–2015. a number of Russian accounting rules (PBU) will be replaced by new federal accounting standards developed on the basis of international norms. This reform will affect all Russian organizations, including leasing companies. According to clause 6 of this document, the complete translation of individual financial statements into IFRS should be completed by 2015–2016.

Nevertheless, even in the current situation, it is possible to objectively assess the activities of the leasing company. This requires a detailed analysis of the market and credit risks of a reliably disclosed leasing portfolio. In practice, however, the provision of this information is a rare "event".

Leasing company appraisal criteria

In this regard, we have identified a group of financial indicators that you should pay attention to when analyzing a leasing company in order to purchase its bonds. They can also be used when considering lending.

These indicators include:

1. The level (sufficiency) of equity capital - is calculated similarly to banking N1. Leasing activities are in many ways similar to banking and are based on the principle of "attraction of resources at lower rates, placement - at higher rates." It is logical to assume that the equity capital indicator not only reflects the scale of the business and the seriousness of shareholders' intentions for its development, but also the ability to cover liabilities in the event of a default on assets at risk (NIL). Speaking about the level of sufficiency, we note that the banking regulator (Bank of Russia) sets the bar for credit institutions at least 10%, while the Basel 3 standard provides for at least 8% excluding the reserve.
2. Coverage of short-term and long-term financial liabilities, taking into account the cost of resources, by leasing payments (leasing portfolio). A time-normalized indicator will be more informative, but the possibility of ranking will arise in the event of disclosure of cash flow (CF) data of the company or qualitatively deciphered IFRS statements. When calculating it, it is necessary to take into account various nuances, for example, VAT on purchased valuables or the amount of advances received from lessees, etc. From our practice, the minimum value of the indicator is about 1.07.
3. Portfolio overdue rate - the share of overdue payments in the total portfolio. Due to the constant change in the volume of the leasing portfolio, this indicator should be considered in dynamics. The data of the research of analytical agencies we use indicate that the range of values ​​of the level of delinquency "out of the crisis" is from 0.5 to 3% of the total portfolio, in times of crisis it expands to 9%. The indicator usually reaches its upper limit in the post-crisis period. It is at this time that the portfolio contains the maximum number of defaulters, and its growth due to new business does not occur.

There are other parameters related to the auxiliary category, but their weight in the overall assessment is less. These include the return on assets, equity and invested capital, the weighted average cost of borrowed funds, and financial leverage. A certain number of criteria can be included in the same group, but our practice shows that they have little effect on the overall assessment.

Approaches to Determining the Credit Capacity of a Leasing Company

There are several approaches to determining the volume of the leasing company's credit capacity from the point of view of investors in the bond market, namely, setting a limit:

• by the scale of activity, taking into account revenue, balance sheet currency with subsequent adjustment for credit quality;
• by liquidity and the size of the portfolio, the basic principle of which is similar to the principle of calculating the limit for the purpose of securitizing the portfolio;
• based on the volume and liquidity of the issuer's debt securities.

But one of the most rational approaches, in our opinion, is to determine the credit capacity limit based on the equity capital adequacy ratio. Thus, we are able to calculate the volume of investments in a leasing company, by which it will be able to increase its working assets without going beyond the equity capital adequacy indicator. The next step in this approach is to determine the "risk appetite", that is, the amount of funds from the calculated credit capacity limit that the investor is willing to invest in the issuer's bonds, taking into account the market characteristics of the securities (yield, duration, offer availability, liquidity), the above credit quality indicators and, of course, subjective expert opinion.

In Russian legislation, accounting in leasing companies is regulated by the Order of the Ministry of Finance on the reflection in the accounting of operations under a lease agreement (Order of the Ministry of Finance-RF dated February 17, 1997 No. 15).

Leasing as a special sphere of entrepreneurial activity, widespread abroad, is currently being developed in the Russian Federation. Leasing activity is new for Russia. After Russia became part of the world economy, leasing appeared in our country. With active implementation, leasing, due to its inherent capabilities, can be a powerful impetus for technical re-equipment of production, restructuring of the Russian economy, saturation of the market with high-quality goods.

If this work did not suit you at the bottom of the page there is a list of similar works. You can also use the search button