Hi, Referring to page 300 in CFAI here… “Growth in operating lease activity will lead to a direct change in our aggregate accrual measures as the liability side is a financing activity.” Can someone point me to how capitalized leases are treated under NOA? Are they saying that the Operating Assets part is counted, but the PV liability portion of the lease is NOT included under Operating Leases? Much thanks!
exactly, the lease will be treated as debt in liabilities.
When capitalising, a portion of it will be in current liabilities (PV of total lease payments - rental payment + interest expense)…therefore current ratio will go down as CL will increase.