ACCA · Question 13 · Analyzing and Interpreting Financial Statements
Section A
A company transitions from renting a factory on a short-term basis (expensed to P&L) to signing a 10-year lease, recognizing a significant Right-of-Use (ROU) asset and lease liability under IFRS 16.
Assuming operating profit remains exactly the same before and after the transition, what is the immediate impact on the Return on Capital Employed (ROCE) ratio?
Answer options:
ROCE will increase.
ROCE will decrease.
ROCE will remain unchanged.
The impact cannot be determined without knowing the interest rate.
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