In its latest quarterly filing, Ameresco Inc. (AMRC), a clean technology solutions integrator, disclosed it discounts operating leases by 12.1%. This rate is significantly higher than the company’s implied borrowing rate of 8.25%.

Using an inflated discount rate hide’s a firm’s true liabilities from investors.

Ameresco reports $52.9 million in future operating lease obligations. The present value of those obligations, according to Ameresco, is $37.2 million. However, the footnotes reveal $10.5 million in not yet commenced future lease obligations Ameresco doesn’t include on its balance sheet, but will by current quarter’s end. Under an accounting loophole, companies can omit from the balance sheet leases that haven’t started.

If we add this liability back and use Ameresco’s borrowing rate as the discount rate, we calculate an estimated lease liability of $47.2 million. It means Ameresco is understating the present value of its lease liabilities by approximately $10 million, or 26.8% of its future operational lease obligations and 1.2% of total current liabilities.

Separately, the SEC has been scrutinizing Ameresco’s revenue recognition between 2014-2020 for certain businesses. In the latest filing, Ameresco says the SEC’s review has been concluded and that the Commission does not intend to recommend further action at this time.