Operating Lease Adjustments

When you make balance sheet adjustments for operating leases, you add the present value of the lease to assets and to liabilities. Do you need to seperate the current liability and the long-term liability portions as part of the adjustments? I didn’t see this in Schweser, but was doing a practice Stalla test and that was necessary to get the correct answer.

Yes, when you’re capitalizing a lease for the sake of adjustment financial statements, you always have to put down an asset and a corresponding liability. The liability needs to be broken up into the two components of current portion of debt and long term debt (long term debt is the Present Value) and the current portfion is the difference between the Present Value at the End of Last year and the End of the Year you are valuing. Don’t forget as well about depreciation and interest expense on the Income Statement. Hope that helps.