Editor’s Note: Accounting Standards Update 2016-02, which requires companies to record operating lease assets and liabilities on the balance sheet, went into effect for calendar year 2019. The adjustments/treatment of operating leases described below pertain to periods prior to 2019. For periods after 2019, we account for operating leases as explained here.

In a special article on Red Flags, Barron’s featured New Constructs’ unique ability to unearth red flags buried deep in corporate filings to help investors make smarter decisions.

We have published many Red Flag reports that highlight the deep analysis we have performed on over 50,000 10-Ks.

The first in our latest series of reports on Red Flags and Hidden Gems is Red Flag Report on Off-Balance Sheet Debt (request access to this report via research@newconstructs.com). This report delivers:

  1. Measurement of the impact of the operating lease accounting loophole on the entire stock market and all 3000 companies we cover.
  2. Explanation of exactly how the off-balance sheet debt from operating leases affect economic earnings.

In addition to the free report provided at the link above, we offer a Premium version (request access to this report via research@newconstructs.com) with specific details on the amount of off-balance sheet debt from operating leases on the top 100 companies with the most off-balance sheet debt.

As detailed in the report, we plan to publish similar reports on all the Red Flags and accounting loopholes we address as part of our effort to deliver clients the whole truth about the profitability and valuation of companies. Current clients of New Constructs have access to the off-balance sheet debt stats for each of the 3000+ companies we cover.

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