Analyzing and Capitalizing Operating Lea se Payments Disclosed in Footnotes
GlaxoSmithKline pl1; headquarte red in London, United Kingdom, is the world’s third lagest pharmaceutical company. The company’s 20 12 balance sheet reported total assets of £4 1,475 million and total liabilities of £34,728 million. The foot. Notes disclosed the following inforn1at.ion related to leasing activities.
Operating leases are not reflected on-balance-sheet. ln our analysis of a company, we often capitalize operating leases, that is, add the present value of the future opera ting lease payments to both the reported assets and liabilities.
a. Compute the present value of GlaxoSmit hKline's operating payments assuming a 6% discount rate and round the remaining lease life to three decima is.
b. What effect would cap italization of operating leases have on GlaxoSmith Kline 's total liabilities and total assets?
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