A finance lease (or capital lease) is a lease arrangement under which the lessee assumes substantially all the risks and rewards of ownership of an asset, without holding legal title. Under IFRS 16, all material lease contracts must be recognised on the balance sheet as a right-of-use asset and a corresponding lease liability — increasing apparent indebtedness and modifying EBITDA presentation (rent charge replaced by depreciation + interest). In financial due diligence, finance lease liabilities are integrated into the financial debt definition under the cash-free / debt-free convention, directly reducing the equity value paid to selling shareholders.

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Example: a Swiss SME operates three machine tools under finance leases for a total of CHF 2.4 million over 5 years. Under IFRS 16 restatement, the right-of-use asset is CHF 2.1 million and the lease liability CHF 2.4 million. This liability is included in the net debt definition at closing, reducing the equity value paid to the seller by CHF 2.4 million versus the unadjusted enterprise value.

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Hectelion systematically restates finance leases under IFRS 16 in net debt analyses for M&A transactions.