Just a quick question regarding this topic as my mind feels numb from all the questions, so if a company capitalize operating leases, the increase in asset is long term or short term? A: Increase by PV of all the minimum lease payments L: Increase by Liability on…future taxes?? lol i am not sure what item would be affected here SH/E: Increase by the difference between A-L…?? I was tumbling on why working capital would decrease (CA-CL). Thanks
currrent liabilities from the capital lease payments increase by more than the current assets increases (capital lease increases non-current assets). therefore work cap decreases. I think***********
Your liability would most likely be called something similar to “leases payable”
A+ by PV correctly L+ by the value of liability… so the same amount as A+ This should not touch SH/E. A+ would be non-current… so L/T as >1yr; However, I dont think this should effect working capital… let the experts reason if not.
There is a current portion of the liability that will incrrent current liabbilities hence decreasing working capital i believe.
Zero is correct - the portion of the lease due in 1 year (or less) would be categorized as a current liability.
@Mafiaboi… I think your working capital question is cleared out, thanks 2 zero. But I noticed that you somehow concluded that the SHE would go up… and thought that you may have confused “Capitalizing costs for intangibles such as Software Development costs etc” with Capital leases, in which case there is an active lease obligation, which should force us to recognize liability. Whereas in the former case, the asset increase would just make the Equity/SHE go up as these are in-house expenses. Now, in case of Capitalizing costs (the former), the working capital should not be effected. I guess you are right. Hope this clears out a bit.