Capital Leases - Total
FinanceLeaseLiabilityCapitalLeaseObligationsCapital (finance) leases – total is the full balance-sheet liability a company owes under its finance leases, combining the portion due within the next year and the portion due later. The liability equals the present value of the lease payments still to be made, discounted at the rate implicit in the lease or the company's incremental borrowing rate.
Under ASC 842 these leases are called finance leases; before that standard, US GAAP called them capital leases. They are leases that effectively transfer control of an asset to the lessee, which is why they are treated much like a purchase financed with debt.
A lessee classifies a lease as a finance lease when it meets criteria in ASC 842, such as transferring ownership at the end of the term or covering the major part of the asset's economic life. The company records a right-of-use asset and a matching lease liability, then recognizes interest on the liability and amortization of the asset separately. ASC 842 became effective for public companies for fiscal years beginning after December 15, 2018. In XBRL filings the current standard's total is tagged FinanceLeaseLiability; periods reported under the old standard use CapitalLeaseObligations.
Regulation S-X Rule 5-02.22 groups capitalized leases with bonds, mortgages, and other long-term debt, which is why many companies report finance lease obligations within their debt footnote and some fold them into a single debt line. Others show them separately, split between current and noncurrent portions. Operating lease liabilities, which ASC 842 also brought onto the balance sheet, are a different category and are not part of this total.
Because finance leases are economically borrowings, analysts usually count the total as debt when calculating leverage, net debt, and enterprise value. GeminIQ's total debt, for example, draws on finance lease obligations. Companies in capital-intensive industries such as airlines, retail, and telecommunications can carry large finance lease balances, so excluding them can understate leverage. Check whether a company's reported debt already includes these obligations before adding them, to avoid counting them twice.
A: They are the same kind of lease under different standards. "Capital lease" is the pre-ASC 842 name, and "finance lease" is the current term. The classification tests changed somewhat, but both describe leases treated like financed purchases.
A: Most analysts treat them as debt, and SEC rules group capitalized leases with long-term debt. Some companies report them inside total debt while others list them on a separate line.
A: No. Operating lease liabilities are also recognized on the balance sheet under ASC 842, but they are reported separately from finance lease obligations and are not included in this total.
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