Had this idea while arguing with myself, as I do time to time on how to account for operating leases and leases in general, and wanted to get some feedback.
If we are capitalizing leases and including them within the capital structure of the enterprise, that capital has a cost. More specifically, the property has an opportunity cost.
Lets say I have a building I could sell today for 100,000. I am going to provide the financing by charging an 8% rate. Instead I am going to lease my building so instead of having 100,000 in face value, I have a building. Lets say the lease payment is 8,000. Would it make sense to do the following ?
Add an asset on the balance sheet equal to the property value = property borrowed
Add a liability to the balance sheet equal to the PV of payments to the lessor discounted at its opportunity cost (so this can fluctuate if opportunity costs and lease payments do not coincide) = Ownership interests in property borrowed
Income statement = MCX required to upkeep borrowed property
Statement of cash flows = Opportunity cost payment to lessor aka lease payment