Original blog posting November 22 2016 Walgreens FASB issued new guidance for leases requiring companies to book both an asset and a liability Walgreens is estimated to be hit the hardest Has over 30 billion in operating lease obligations ID: 735000
Download Presentation The PPT/PDF document "How will Walgreen’s leases impact its ..." is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
How will Walgreen’s leases impact its financial position under the new FASB lease standard?
Original blog posting (November 22, 2016)Slide2
WalgreensFASB issued new guidance for leases requiring companies to book both an asset and a liabilityWalgreens is estimated to be hit the hardest
Has over $30 billion in operating lease obligations
Estimates of how much will have to be included on its balance sheet range from $18.2 - $33.7 billionSlide3
Question 1Why do you think FASB revised this lease standard? Slide4
Question 2Assume that Walgreens puts the total amount of its leases into a long-term lease asset on its balance sheet and the offsetting credit is partially to a short-term liability (for lease payments due in the next year) and the remainder to a long-term liability. What will be the likely impact on Walgreen’s return on assets (increase, decrease, or no effect)? Explain.Slide5
Question 3Again, assume the lease amount is booked as a debit to a long-term asset, and the credits to both a short-term liability and a long-term liability. What will be the likely impact on Walgreen’s current ratio (increase, decrease, or no effect)? Explain.Slide6
Question 4Is the impact of the new lease accounting standard going to be material for Walgreens? How do you know?Slide7
Question RecapWhy do you think FASB revised this lease standard? Assume that Walgreens puts the total amount of its leases into a long-term lease asset on its balance sheet and the offsetting credit is partially to a short-term liability (for lease payments due in the next year) and the remainder to a long-term liability. What will be the likely impact on Walgreen’s return on assets (increase, decrease, or no effect)? Explain.
Again, assume the lease amount is booked as a debit to a long-term asset, and the credits to both a short-term liability and a long-term liability. What will be the likely impact on Walgreen’s current ratio (increase, decrease, or no effect)? Explain.
Is the impact of the new lease accounting standard going to be material for Walgreens? How do you know?Slide8
For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/
Questions or comments?
Contact Dr. Wendy Tietz at
wtietz@kent.edu