"The other case is when they do crop up in FY2020 there will also be a decent uptick in lease assets and as they payback the lease on a yearly basis the value of the lease liability reduces."
That will only be the case if a company does not renew any of its leases.
And why would that possibly happen?
This would only be the case for leases which are due for renewal, for leases which still have 1 or more years remaining they wouldn't need renewing as of yet anyway. The other point is even when we renew the lease, asset will increase in proportion with liabilities to reflect the economic benefit which is to be realised from utilizing the lease.
Yes, this could mean that convenant on a scale would look uglier as liability/ebitda is crippled but we all know it there the only different now going forward it in black and white on the balance sheet.
As we use the lease and make payments the lease liability should decline on the balance sheet until a point where the lease is required to be renewed again unless the store is closed.
I don't really see any great deal in changes with the accounting change certainly not on a operational level. It more a case of investors now having a more clear cut picture as to the ongoing fixed costs which they will need to pay out from a transparency perspective otherwise it is still business as usual.
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