Tuesday, July 30, 2019

Our exploration of the new accounting standard for leases continues today with a look at how companies can adopt the new standard’s disclosure rules, yet still not report leasing costs and assets specifically on the balance sheet.

Yes, that’s possible. Case in point: Comcast Corp.

First, let’s remember what the new standard (ASC 842, Leases) seeks to accomplish. Companies must report the costs of operating leases as liabilities on the balance sheet, rather than keep those numbers tucked away in the footnotes. Companies are also supposed to report the value of leased items as right-of-use (ROU) assets on the asset side.

The leasing standard went into effect at the start of 2019. Since then we’ve seen many companies report those leasing assets and liabilities as individual line items on the balance sheet, clear and easy to find. (You can see our prior coverage of leasing disclosures in our blog archives, and don’t forget our special report on leasing costs among the S&P 500.)

One small point, however — companies don’t necessarily need to report leasing costs and assets as separate line items. Which brings us to Comcast ($CMCSA).

Technically, ASC 842 allows companies to include the amounts of lease assets and liabilities within other line items on the balance sheet, so long as the detailed amounts are clearly reported in the footnotes. That’s what Comcast does.

See Figure 1, below, which lists Comcast’s assets for the first two quarters of 2019. An item for ROU assets is not there.

But if you dive into Comcast’s footnotes, in the Accounting Policies section, Comcast says this about the effect of the new leasing standard: “Upon adoption, we recorded $4.2 billion and $4.8 billion for operating lease assets and liabilities, respectively.”

Then Comcast refers readers to Note 11, the Commitments and Contingencies section. There, Comcast reports $4.1 billion in ROU assets and $4.7 billion in liabilities (apparently each item declined a bit between start and end of Q1), which are rolled into Other Noncurrent Assets and Other Noncurrent Liabilities, respectively.

Other Noncurrent Assets were at $8.64 billion in Q1, and Other Noncurrent Liabilities were $18.81 billion. So clearly Comcast has indeed reported its leasing expenses. It just reported them in a way that leaves the numbers hard to find unless you know how the ASC 842 standard works, and where to look for the fine print.

More Details

Another fun fact: a company cannot report operating and financing leases in the same line item. So while Comcast reports its operating lease ROU assets in Other Noncurrent Assets, it reports the assets for its finance leases in the Property, Plant & Equipment line. Likewise, the liabilities for finance leases are rolled into Long-Term Debt.

All of that is disclosed in the footnotes. Comcast has done nothing wrong. Critics might say that Comcast still hasn’t fulfilled the spirit of ASC 842, since the point of the standard was to make leasing items more visible to investors.

Calcbench takes no view on that argument. We only want to note that companies can report numbers this way, and Comcast is not alone in doing it.

Calcbench offers a few solutions here. First, you can use our Interactive Disclosures page to search the footnotes, including text searches for “operating leases.” We always recommend reading the footnotes, so that’s one idea.

Second, you can use our Multi-Company page to search for leasing disclosures. You can search either by standardized metric or by XBRL tag, and we will pull those morsels of data from the footnotes, no matter what a company reports on its balance sheet.

Either way, you’ll get the data you need. Calcbench has you covered.

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