Creative Accounting in Eastern Europe: the Case of the Polish Port Companies

Dariusz Bernacki, Carl Reyns
European Research Studies Journal, Volume I, Issue 2, 49-59, 1998
DOI: 10.35808/ersj/12


During 1991, a large number of small companies was created to run the operational activity of the Polish seaports, which was until then monopolized by state-owned enterprises. The major part of the shares is held by the employees. Leasing-techniques are used to solve the problem of financing the infrastructure. Although the profit-margins are relatively modest, the return on total assets is rather important because the infrastructure does not appear on the assets-side of the privatized companies. As a consequence of what we call leasing-leverage, the return on equity reaches almost astronomic heights. In the conclusion we indicate the potential dangers of this situation; the financial construction does not solve the ownership-problem of the assets, can lead to only very short-term based decisions and does not guarantee continuity when the assets have to be replaced.

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