Couldn't much of this accounting issue be avoided simply by defining financial leverage as "Total assets divided by common equity"? If this financial leverage ratio is moving up, a lender or investor doesn't care if it is bank debt, LTD, deferred taxes or preferred shares - the balance sheet is more leveraged. The FLM is also one of the components of the Dupont formula which analyzes the source of ROE so you can see if ROE is improving because of operational improvement or financial engineering.
Couldn't much of this accounting issue be avoided simply by defining financial leverage as "Total assets divided by common equity"? If this financial leverage ratio is moving up, a lender or investor doesn't care if it is bank debt, LTD, deferred taxes or preferred shares - the balance sheet is more leveraged. The FLM is also one of the components of the Dupont formula which analyzes the source of ROE so you can see if ROE is improving because of operational improvement or financial engineering.