why capitalize an expenditure overestimate the value

CFA Level II
#1

for residue income model, why? does capitalize operating lease belong to capitalize an expenditure? Thanks.

#2

capitalizing means youre not expensinve which means expenses are understated which means NI is overstated

#3

for capitalize operating lease, the depreciation will reduce NI… the show NY Wrote: ------------------------------------------------------- > capitalizing means youre not expensinve which > means expenses are understated which means NI is > overstated

#4

Bigger issue with capitalization of expenses for purposes of RI model is that it effects your balance sheet. RI = Earnings - R(B) While you would still have an expense in earnings related to a capitalized expense in the form of depreciation, by having it as an asset on the balance sheet means you have a larger charge for equity. I believe net impact would be lower RI.

#5

operating leases arent capitalized, theyre expensed

#6

I believe he’s referencing the adjustment - capitalizing an op lease.