Everyone knows that the tech giants and AI hyperscalers are betting big on data centers. Calcbench has been taking a deep dive into Q2 disclosures of those companies, and today we offer a better sense of how big those bets are.

Then in December, we flagged that Oracle had leapt to the top of the S&P 500 for year-over-year growth in Remaining Performance Obligations — a 359 percent increase, from $99.1 billion to $455.3 billion, the single largest jump among 151 firms we tracked.

Now it's March, and Oracle just filed its fiscal Q3 2026 results. Spoiler: both of those numbers have gotten even bigger.

The two charts below tell the story. We pulled them directly from Oracle's disclosures using Calcbench — the kind of analysis any subscriber can run in minutes.

What to Watch Next

Oracle is now, unambiguously, one of the largest AI infrastructure bets in the market. The question analysts should be asking isn't whether the demand is real — the RPO chart pretty clearly shows that contracts are being signed. The question is whether Oracle can actually deliver on $550 billion in performance obligations while simultaneously managing $262 billion in off-balance-sheet lease commitments and the capital expenditures required to bring those data centers online.

We looked at this capex question briefly in our February post on AI hyperscaler spending, where we noted that Oracle's capex spending was soaring even as operating cash flow struggled to keep pace. Unlike Amazon or Google, Oracle is entering capital-intensive territory for the first time. The company's comfort zone has always been software licensing and database contracts — high-margin, low-capital businesses. What it's doing now is something altogether different.

You can track all of it in Calcbench — RPO, off-balance-sheet commitments, capex, operating cash flow, free cash flow, debt levels. Use our Multi-Company page, our Disclosures & Footnotes Query, or our API if you'd rather pipe the data directly into your own model.

The numbers are there. They're updated in minutes. And in Oracle's case, they are absolutely worth watching.

For more information or to start a free two-week trial of Calcbench Premium, email us at us@calcbench.com.

Earlier this week we had a post about Oracle’s ($ORCL) exposure to off-balance sheet leasing commitments, and particularly how those amounts have soared to an eye-popping $99.8 billion in recent months — none of it included on Oracle’s balance sheet.

You may have seen the Financial Times’ excellent article the other day analyzing Oracle ($ORCL), picking apart the tech giant’s exposure to OpenAI and the many ways that mammoth deal might turn sour for Oracle.

Or maybe you already knew Oracle’s potential risk here because you’ve been studying those same disclosures yourself — disclosures that are all readily available in Calcbench.

Don’t get us wrong; we appreciate the FT’s article, which is packed with good points and insight. But consider the key metrics that the article cites:

• Segment-level revenues

• Debt levels

• Cash and short-term investments as a percent of total assets

• Free cash flow

• Leases

• Debt-to-equity ratio

Calcbench tracks all those metrics for public filers. So if you had wanted to run your own analysis of Oracle’s exposure to OpenAI, perhaps comparing that exposure to other AI “hyperscalers” such as Microsoft ($MSFT), Google ($GOOG), and Amazon ($AMZN) — well, we’ve had all that data all along, there for the picking.

Always in the Footnotes

For example, the article notes near the bottom that Oracle “has signed at least five long-term lease agreements for US data centres that will ultimately be used by OpenAI, resulting in $100 billion of off-balance-sheet lease commitments.”

That’s absolutely right: if you look at Oracle’s most recent annual report (filed last May), you’ll see $147.4 billion in total liabilities, and only $11.5 billion in operating lease liabilities. 

So where is that disclosure of $100 billion in off-balance sheet lease commitments? It’s in the footnotes! Specifically, the number is tucked away at the bottom of a note blandly labeled “Leases.” See Figure 1, below.

You’ll notice that the exact number is $99.8 billion, and that number is tagged in XBRL. This means that you can use our See Tag History feature to see how that number has changed over time. We did exactly that — and those Calcbench fans with heart conditions may want to sit down and take a few deep breaths before reading further. Ready? See Figure 2, below.

Holy poop, Oracle’s off-balance sheet leasing commitments have increased by 24,822 percent in five years — from $411 million in 2020, to $43.4 billion at the end of the company’s fiscal 2025 six months ago, to $99.8 billion as of Aug. 31.  

Oracle’s off-balance sheet commitments more than doubled in its summer quarter. Presumably all of that is due to the deal that Oracle reached with OpenAI in the same period, where OpenAI has agreed to purchase $317 billion of computing power from Oracle for years to come. 

That computing power has to come from somewhere, which means Oracle needs vastly more data center resources. Hence its leasing commitments are soaring. 

The company will file its next quarterly report in early December, and lord only knows what the off-balance sheet leasing commitments will look like then. But as soon as Oracle does file those numbers, Calcbench will have them indexed and ready for analysis within minutes. 

Other Metrics

So that’s the off-balance sheet commitments. We also mentioned a squadron of other performance metrics cited in the Financial Times article: cash, debt, free cash flow, debt ratios, and so forth. Where can you find those? 

One great place to start is our Bulk Data Query page, which lists just about every financial disclosure a company might ever make. That includes individual items on the income statement, balance sheet, and statement of cash flows; plus other non-standard disclosures and even important liquidity ratios that you’d typically need to calculate yourself. Calcbench has all that for you.

For example, if you go to the Bulk Data page and scroll to the bottom, you’ll see more than two dozen profitability, liquidity, and solvency ratios. Figure 3, below, lists them all, with debt-to-equity highlighted since that one was mentioned in the FT article.

All these metrics can be calculated and then exported to your desktop in a tidy spreadsheet. You can then fiddle with them to your heart’s content, especially if you have our Excel Add-in. Alternatively, power users can have the data piped directly into your own models using our API. If you need help with either of those, email us at us@calcbenc.com any time.

Our point is simply that you don’t need to wait for the business press to write an in-depth article exploring possible AI bubbles or any other corporate financial scenario. If the data is out there, we have it, and you can consume it as soon as you’re ready.

Summary: SEC comment letters are not immediately released to the public, but a study of long-term trends shows that the delay in disclosure of those letters has fallen dramatically. 

In our previous post we examined the number of comment letters the SEC sent companies in 2020 and 2021, as well as how many replies companies sent back. An interesting point is that comment letters sent to or from the SEC do not immediately become public. Rather, there is a delay of at least 20 business days (per SEC rules), and sometimes the delay is longer.

So what is the average delay in publication of comment letters? Calcbench decided to investigate.

When one searches the EDGAR database of SEC filings, you can find SEC comment letters to a company and all the ensuing correspondence — but you can only find when the letters were filed, not when the letters became public. Fear not, however! Calcbench has you covered.

Calcbench our database notes when comment letters are released by the SEC, and records both the date in which the letters were filed and the date those letters were released. The delay between when a letter is filed and when it was released is interesting.

We examine the trend in the average delay between when a letter is filed to when it is released to the public over the last 10 years. As you can see in Figure 1, below, that delay has declined markedly — from roughly 140 days in 2011 to only 60 days in 2021. (Keep in mind that some comment letters filed in later years have not yet become public, which will increase the delay, but the trend seems to be very telling.)

We can also see that the delay in releasing SEC comment letters is slightly higher than the delay in releasing companies’ correspondence.

Are these patterns true for both large and small companies? We decided to answer that too, so we ran the same analysis for S&P 500 companies specifically.

As you can see from Figure 2, below, the same meaningful decline holds true for large companies. When comparing the delays, we note that the average delay is actually shorter for the S&P 500 than it is for all companies. The average delay we observe for large firms in 2021 is roughly 40 days, compared to 60 we saw for all companies.

Many factors can affect the delay in the SEC releasing the letters to the public, such as:

• The time it took the SEC to complete its review;
• The time it took the company to respond to the SEC;
• The complexity of the topic reviewed;
• The efficiency in the review or the resources spent on it.

Our analysis doesn’t examine the reasons for the factors that affect the delay, but for those of you interested, Calcbench has the data. Visit Calcbench’s filings page to see when filings are files and released. If you want to search the comment letters, you can do that in the disclosures page.

What can you do?  Here’s what you can do.  Calculate a Net Income margin in real time.  This morning, Friday October 22, 2021 at 9:25 EDT, we retrieved all S&P500 firms that had reported this period.  There are 103 firms in our sample as of that time.  

Net Income for those firms was 129 Billion.  Revenue was 790 Billion for a margin of 16.3%

Last year for those same firms, the number are 75.8 B Non Net Income and 698B in revenues for a margin of 10.9%.  

Get the Excel Add in  and have a go yourself!

Thanks!

Another day, another nifty time-saving feature we are happy to offer Calcbench subscribers. This time around it’s an ability to export earnings release data directly to Excel, almost immediately after said earnings release hits the wires.

Here’s how it works. Start at our always-popular Recent Filings page. This is where Calcbench presents the latest filings from public firms, which we capture and prep typically within a few minutes of those firms filing their disclosures to the Securities and Exchange Commission. See Figure 1, below.

Notice that column on the right-hand side that says “Export to Excel” in numerous places. Behind the scenes, Calcbench has indexed the data in those filings so that they can be, you guessed it, exported directly to Excel.

When you click on that option, an Excel file will download onto your computer that you can open, read, and start using. For example, we downloaded the Citigroup ($C) third-quarter earnings release filed this morning, and immediately saw this, Figure 2.

The spreadsheet shows the financial results Citi presented in its earnings release: 3Q 2021, plus the prior quarter, plus the year-ago quarter. You can even see quarter-over-quarter and year-over-year change!

Figure 2 is just one example of what you’d see from Citigroup; there’s a lot more in the Excel spreadsheet that we haven’t shown. Our Export to Excel feature can capture just about any table with tagged data that a company includes in its earnings release, from a summary of financial performance, to full income statement or balance sheet, and even reconciliation statements.

The flip side is that if a firm doesn’t file lots of information in its earnings release, the Excel spreadsheet will be smaller. For example, we also have this Q3 summary from Morgan Stanley ($MS), also filed today, in Figure 3, below.

Morgan Stanley only offered 3Q 2021 and 3Q 2020 data in its release, so that’s all we can pull. If you want 2Q 2021 or other periods, you gotta wait for Morgan Stanley to file its full 10-Q report in a few weeks.

We should also add that our new exporting capability works for some earnings releases, but not all. Some firms will structure their releases in quirky ways that leave the data beyond indexing. Tesla ($TSLA), for example, is a party-pooper that files its earnings release as a JPEG image. Humans can read that, but algorithms can’t — so you won’t be able to do this nifty stuff with Tesla. (If you look back to Figure 1, you can see a few other firms where Export to Excel isn’t available either. Most of the S&P 500 will be, but it’s not universal.)

You can, however, still read filings from Tesla or any other errant firm in our usual Interactive Disclosures database, and export the data to Excel from there. It’s one extra step, but you do end up in the same place. For more information on earnings press releases, check out our how-to video. 

Calcbench now has standardized face financial data from earnings press releases minutes after they are published.  This will be useful for quantitative asset managers who want to include fundamental signals in their model.

Calcbench is extracting the metrics from the income statement, balance sheet, and statement of cash flows.  This includes market moving revenue and earnings per share numbers.  Quality is improved by Calcbench’s ten years of experience parsing the XBRL 10-K/Qs.

We listen for the news wires and earnings announcements filed as 8-Ks on the SEC’s Edgar sight.  The Calcbench extraction process is entirely automated so you have numbers minutes after they are published.

For back-testing purposes we have about 10 years of history with time-stamps of when the data was available.  Coverage is almost all US public companies.

A sample for the 30 companies in the DOW is @ https://www.dropbox.com/s/vazfcnlbhhqyh2n/blog_data.csv?dl=0.  An example of a script to get the data is @ https://github.com/calcbench/notebooks/tree/master/filing_listener.  For a larger sample and to discuss integrating the data into your process email

us@calcbench.com.

Another quarter, another expansion of Calcbench’s awesome financial data superpowers. This time around, we’re here to tout updates to our earnings press release tools.

The news is this: that Calcbench Professional users can now access all numbers in the text and tables of firms’ earnings releases, within minutes of said press releases hitting the wires. In a recent study we conducted of more than 13,000 press releases, our users had access to data within press releases in an average of five minutes.

Those enhancements enable financial analysts and money managers to make more informed decisions, using Calcbench’s model-ready data. As with all Calcbench data, earnings press release data is available to export from our website, or can be directly accessed through Excel, Google or the Calcbench API. (You can also see earnings releases on our Recent Filings page. It will look like Figure 1, below.)

One recent example is Iron Mountain ($IRM), an enterprise information management company. On May 6, prior to 7:00 a.m. ET, Iron Mountain released its earnings press release. By the time the market opened, Iron Mountain’s stock price gained $0.78. By the closing bell, Iron Mountain’s price increased another $2.14. Analysts who had systemic access to the press release data would have had their models primed to take advantage of those price moves.

“Information moves markets. Calcbench understands that the more efficiently analysts can populate their models, the faster they can act on the new information.” said co-founder and CEO of Calcbench. Pranav Ghai. “That’s why immediate access to data embedded in earnings press releases, such as GAAP, non-GAAP, key performance indicators and segments, is critical.”

We agree, and not just because Ghai is our boss. The point is valid no matter who says it — and because it’s valid, that’s why we’ve developed that access to the data for our users.

By the way, Calcbench continuously upgrades its functionality based on user feedback. We previously announced the ability to compare side-by-side comparisons of preliminary income statements against previously reported numbers, without the hassle of manually inputting the data.

What will we do next? Stick around and find out.

Every now and then Calcbench reviews the time that elapses between a firm publishing its earnings release and the subsequent filing of its 10-K or 10-Q. We started this analysis back in 2016, then followed up with another look 2018, and yet another in 2020.

Now we have some fresh numbers for 2021. We looked at the most recent 10-Q filing period for 386 firms in the S&P 500; a table of our findings is below. As you can see, 63 percent of the firms in our sample filed both documents within a day of each other, and more than 40 percent filed both documents on the same day.

Still, 10.1 percent of our sample took 10 days or more after filing the earnings release to follow up with the 10-Q. This time lag makes earnings release data more important, since you can act on it quickly rather than wait for the 10-Q to be filed.

Unlike when we started tracking this data in 2016, today Calcbench collects all data in 8-K filings and provides that data to our clients so they can populate their models. So if you want to learn more, drop us an email or use the chat function on Calcbench.

Good news for all you data fanatics, eager to export yet more corporate disclosures into Excel so you can perform whatever analysis you’re hoping to do: Calcbench has added new capability to let you pull data from earnings releases.

Here’s how it works.

First, you need an earnings release. Perhaps you have one because you’ve set up your Calcbench email alerting functions and been notified that one of your favorite firms just filed an 8-K earnings release; or maybe you were skimming our Recent Filings page and a firm’s release caught your eye. We randomly selected Cornerstone Building Brands ($CNR), which filed its latest earnings release on Nov. 10.

Anyway, you have the earnings release displayed on your screen. What then? Look for the small Excel icon along the top of the main display panel, next to the firm’s ticker and the ‘8-K: Results’ descriptor. See Fig. 1, below; we’ve pointed to the icon with a blue arrow.

When you click on that icon, an Excel spreadsheet will download with all the earnings release data organized into neat rows and columns. It will look something like Figure 2, below:

There’s a lot going on in that spreadsheet, so let us explain. Some of the columns track details that might not be urgent to financial analysts, such as tag identifiers or Securities and Exchange Commission filing codes. In Figure 2, we shaded in orange the columns that are most important to financial analysts. Those columns won’t be shaded in your own download, but some examples include:

• Effective value, which is the data expressed as an actual numeric value. For example, something that might display as 21.3 percent to us humans has an effective data value of 0.213.
• Reported value, which is that number gussied up for human consumption: 21.3, since in the filing it will be reported as a percent.
• UOM, which stands for “unit of measurement.” You might see “USD” for dollars, “PCT” for percentage, and so forth.
• Label, which is what the disclosure represents: net income, increase in net income, pro forma net sales, and so forth.

Once you have that data in Excel — well, what you do with it next is your choice. Calcbench simply strives to provide all the data you want, in a manner that lets you use the data however you want. This is one more step toward our goal. Enjoy!

Calcbench friends. We heard you. In response to client and prospect requests to see all the data in press releases, we’ve launched improvements to our tools.   

Now you can:

-Grab bulk data from the press releases -Access time series press release data -Save time (get every single line item within the press release with a mouse click)

Here's a quick 'How To’ for retrieving non-GAAP data using the Excel Add In

Calcbench continues to evolve its platform. Look forward to programmatic access to the full press release. 

Your feedback is always welcome. Email us@calcbench.com for suggestions to improve our platform.

Calcbench makes it easier for analysts to extract numbers from earnings press-releases. In this post we will focus on the Non-GAAP numbers, those numbers not in the income statement, balance sheet and statement of cash flows.

As an example we will get non-cash compensation expense allocated to research and development for software companies, i.e. stock options awarded to software engineers. This example assumes, that you have a Calcbench account, sign up for a free trial @ calcbench.com/join and have installed the Windows version of the Excel Add-in from calcbench.com/excel. 

1. Open the Disclosure Viewer

2. Find the relevant Earnings Press Release in the Disclosure Viewer

3. Click on the piece of data you want. This will insert the formula for the fact

4. Parameterize the period arguments to the inserted formula

5. Add more periods and drag the parameterized formula over.

Non-cash compensation for the software industry is collected @ https://www.dropbox.com/s/8dtcoiea7conkvs/r%26d%20stock%20based%20compensation.xlsx?dl=0.

This blog will outline the importance of and the steps to getting data out of the press releases that Calcbench has been collecting for the past two years.

Corporate press releases are released ahead of the quarterly earnings call that the company has with analysts and investors. The press release has information that won’t necessarily get into the 10-Q / 10-K. For those reasons, it becomes important for users to get this data.

Historically, users only had access to this data by manually collecting the releases and then inserting data (hand keying information) into their spreadsheets/databases.

Today, that has changed.

Using Calcbench, a client can get this data in a few different ways. First, they can simply view it online. They can collect data from the web by exporting it. Or, they can bypass the web and access this data DIRECTLY through our Excel Add In or the Calcbench API.

See below from the income statement section of Paychex 8-K that came in on the morning of October 6, 2020. Also, note that this information collection process pertains not only to the Income statement but also to the Balance Sheet and the Cash Flow statement. Calcbench also captures tables of data as well, including GAAP to NON-GAAP reconciliation tables.

Visit Calcbench disclosures page and retrieve the 8-K in full or read it online. Or, for more information on our earnigngs press release tools, go to: https://www.calcbench.com/home/earnings_release_data

Standardized financials from Earnings Press Release and 8-Ks are now available via the Calcbench API minutes after published.  Calcbench is leveraging our expertise in XBRL to get many of the numbers from the Income Statement, Balance Sheet and Statement of Cash Flows from the earnings press release or 8-K.  

Data for the Dow 30 is @ https://www.dropbox.com/s/9rzxu81w2sitr9l/calcbench_pit_preliminary.csv?dl=0.  The data starts in 2010.

The file includes numbers from the press-releases and the subsequent XBRL filings.  True in the preliminary column indicates the number was parsed from an earnings press-release.  True in the XBRL column indicates the number appeared in an XBRL document.  Therefore, True in the preliminary and XBRL columns indicates Calcbench parsed the number from the press-release and subsequently “confirmed” it in the XBRL document,  True in the preliminary column with False in the XBRL column indicates the number was parsed from the press release and was not subsequently “confirmed” in the XBRL 10-K/Q.  

An unconfirmed number could indicate that the number was reported differently in the XBRL document sometimes it will just be a rounding error, or Calcbench parsed the number from the earnings release incorrectly.  In the case where the XBRL number differs from a previously reported earnings release number the XBRL number will have a revision number greater than 0.

The date_reported column is when Calcbench published the data and it would have been tradable.

This file was created using the code @ https://github.com/calcbench/notebooks/blob/master/standardized_numeric_point_in_time.ipynb.

For a larger sample size and other questions email us@calcbench.com

Periodically at Calcbench, we take a look at the time between earnings announcements dates and the subsequent 10-K, or 10-Q. It was something that we originally did back in 2016.

We followed that up with another post in 2018.

So we took another shot today and looked at the most recent 10-Q filing period for 405 firms in the S&P500. Here’s a table of results. As you can see, 62.5% of firms in our sample, filed both documents within a day of each other, with over 40% filing in the SAME day!

Unlike in 2016 when we started tracking this data, today, we actually collect 8-K data and have clients using it. So if you want to learn more, drop us an email or use the chat function on calcbench.

Let us know if you want more.

Many of our readers have also expressed the desire to see the list of the companies who publish both on the same day. Here they are:

Calling all devotees of operating lease assets: Calcbench just published a research note examining the potential impairment of those assets — which, as we say in the note, is no longer potential. It’s happening.

A PDF version of the research note is available to all. We review the changes to accounting rules that have compelled companies to start listing operating leases as assets on the balance sheet; and the rules that guide companies on when to declare an impairment of those assets; and several examples of operating lease impairments reported by actual firms in the last few months.

Of course, impairment of assets is not a new concept — but historically, financial analysts only got their undies in a twist over impairment of goodwill assets. Now that companies are also reporting operating leases as assets, those too can be impaired.

Well, how often might leased assets get impaired? Under what circumstances? Could those impairments lead to a material earnings surprise? Or are impairments more hype than substance, over a company’s long term?

We answer all those questions in the research note.

One good example: Hi-Crush Inc. ($HCR), a mining company that specializes in sand and other aggregates. Business did not go terribly well for Hi-Crush last year, and in Q3 2019 the company declared asset impairments totaling $346.4 million — including a $76.3 million impairment for leased railcars.

That was more than double Hi-Crush’s impairment for goodwill in the same period. So clearly impairment of leased assets can be significant. See Figure 1, below.

Anyway, the research note has several other examples, plus a discussion of the accounting rules that have brought us to this moment. If you need a primer on the issue and how Calcbench can help, give it a read!

The new accounting standard for leasing costs is no longer so new, but its secondary effects on financial reporting still are. Today Acuity Brands ($AYI) gave us one glimpse of that, when it declared an impairment on a leased asset.

What happened? Acuity, which sells indoor and outdoor lighting plus assorted other equipment, filed a rather yucky Q1 2020 report. Revenue down by 11 percent, operating profit down 36 percent, net income down 40 percent. The company also announced the arrival of a new CEO to turn things around.

What caught our eye, however, was a $6.9 million item on the income statement labeled “special charge.” See Figure 1, below; with the line-item highlighted blue.

That $6.9 million was far larger than any other special charge Acuity has reported lately, and it’s always wise to look closely at special charges anyway. So we did, using the ever-handy Calcbench Trace feature.

In the footnotes, we then found this disclosure from Acuity:

During fiscal 2020, we recognized pre-tax special charges of $6.9 million. The fiscal 2020 special charge consisted primarily of severance costs and ROU asset lease impairments related to planned facility closures. Additionally, we recognized charges for relocation costs and ROU lease asset impairment charges associated with the previously announced transfer of activities from planned facility closures.

In other words, Acuity is closing a few facilities and that will cost it $6.9 million. Acuity goes on to say that $5.1 million of the charge will be related to severance costs, and the company had been accruing reserves to cover that amount — but the remaining $1.8 million is indeed an impairment of the leased facility Acuity had been using.

Why Is This a Big Deal?

This is a big deal because it demonstrates that the new lease accounting standard, which went into effect last year, can indeed affect earnings. Sure, in Acuity’s case this impairment isn’t a material amount of money — but until last year, you wouldn’t see something like this at all. Now you can.

The standard, ASC 842, requires companies to list their leased assets — commercial stores, airport gates, office equipment, data storage facilities, and so forth — on the balance sheet. The costs of the leases are listed as liabilities, the value of the leased items listed as assets. (We discuss all these issues at length in several white papers on our Research Page, if you want to know more.)

Like any other asset, however, that means the value of those leased items could fall, and the company would therefore need to declare an impairment. When that happens, the impairment is reported as a charge against earnings.

This happens with goodwill assets on a regular basis and sometimes with other intangible assets as well, so the idea isn’t new. It’s just expanding to a new type of asset: operating leases.

How common will this be? That’s hard to say right now. We’re not sure any other company has reported a charge like this. In theory, however, an impairment to leased assets might arise if a company signs a long-term lease for something and then economic circumstances around using that item change dramatically.

For example, a large bookseller might have signed a 20-year lease for commercial stores in 2011, and by now Amazon has whittled away the value of those stores — and if the locations are in crumbling shopping malls, who else is going to take that space off the bookseller’s hands before the 20-year lease expires in 2031? That’s how the lease accounting rule could end up forcing companies to serve up an earnings surprise.

Another question is whether these impairments would ever be material. In Acuity’s case, the impairment isn’t; even without it, the overall 10-Q numbers would still be pretty gross.

Still, for devotees of financial reporting, Acuity’s disclosure is a rare bird. We’ll keep looking to see whether any more fly by.

Yes, yes — we talk constantly about the new standard for disclosure of operating lease costs, and we just published an in-depth report about the new standard’s effect on the retail sector.

Well, we have even more. Today we look at how the new standard changes the return on assets for two of those retailers: Burlington Stores ($BURL) and Michaels Cos. ($MIK).

Return on assets (ROA) measures how efficiently a firm manages its assets to create a dollar of profit. It’s calculated as net income divided into total assets, and is expressed as a percentage. The higher the percentage, the more efficiently a firm puts its assets to work to make money.

But wait! The new leasing standard (ASC 842, if you care) requires firms to report the value of leased assets on the balance sheet. Mathematically, that means the standard is increasing the denominator of the ROA equation.

So could a firm see its assets expand so rapidly that ROA actually falls, even if net income goes up? Yes it could. Burlington Stores and Michael’s Cos. are two cases in point.

See Figure 1, below. It compares their net income and assets in Q4 2018, just before the ASC 842 standard went into effect; with the same numbers in Q2 2019, after ASC 842 arrived.

As you can see, ROA for both firms fell sharply, solely because of ASC 842. We calculated what their Q2 2019 numbers would have been without operating lease assets included. In both cases, ROA would have risen.

That change in operating metrics isn’t necessarily disastrous. After all, the business operations themselves didn’t change to any material degree; accounting rules did. The trick for firms in this predicament is to communicate the reasons behind that change clearly and effectively, so investors won’t misunderstand what’s happening.

Now we’re off to pick up a new coat and some crafting supplies. Winter is coming and we want to decorate our laptops for the holidays.

Devout readers of the Calcbench blog already know how much we love the new accounting standard for leasing costs. Now we have even more for those of you who also follow this subject closely: our latest in-depth look at leasing accounting costs among the S&P 500.

The new standard went into effect at the start of this year. It requires firms to report the costs of operating leases as liabilities on the balance sheet, and also to add a corresponding right-of-use (ROU) asset on the asset side.

In theory, leasing liabilities and ROU assets should offset each other. In practice, most firms have a discrepancy one way or the other between those two items — assets greater than liabilities, or liabilities greater than assets. Our paper examines the S&P 500 to see how large those discrepancies are.

The complete paper is available for download on the Calcbench Research page. Meanwhile, we have a few key findings here.

First, most firms do have discrepancies between assets and liabilities. Among the 382 firms in the S&P 500 that reported leasing items, only 21 had leasing liabilities and ROU assets in Q1 2019 where the values were exactly equal. Most firms had liabilities larger than assets, although a small number did have assets larger than liabilities.

To be clear — the discrepancies themselves are fine. They don’t violate financial reporting rules. The new accounting standard only aims to give investors a better sense of a firm’s assets and liabilities, and discrepancies are allowed. We just found lots of firms fitting that scenario.

Second, those discrepancies do add up. Collectively, those 382 firms had $475.2 billion in assets and $495.8 billion in liabilities. That means leasing liabilities exceeded ROU assets by 4.16 percent. The median firm had $434 million in assets and $446 million in liabilities, a difference of 2.69 percent. (See Table 1, below.)

When you examine specific firms those discrepancies can become significant, in either relative or absolute dollar terms.

For example, AT&T ($T) had $20.23 billion in assets, and $21.32 billion in liabilities. That is, its leasing liabilities were more than $1 billion larger than ROU assets. Meanwhile, Wynn Resorts ($WYNN) had ROU assets of $444.1 million, but liabilities of only $158.6 million.

Our report lists the firms with the largest differences in both absolute and relative terms. The names may surprise you.

Third, this new standard can have big effects on a firm’s balance sheet. Last summer we examined firms that were carrying large leasing liabilities off the balance sheet, under the prior accounting standard. We estimated how those firms’ total liabilities would increase if you added those off-balance sheet leasing liabilities onto the balance sheet. In some cases, total liabilities would increase 300 percent or more.

Now that the new standard is here, we revisited those same firms to see how their balance sheets actually did change in Q1 2019. Most of our predictions were close; a few were larger, and a few smaller.

Regardless, this standard can have a big effect on the balance sheet. That, in turn, has an effect on financial metrics such as return on assets or debt-to-equity ratios — all due to a change in accounting rules, rather than any change to business performance. (We did a deep dive on this issue just last week, looking at Chipotle Mexican Grille ($CMG), if you’re curious.)

Financial analysts need to understand and anticipate those changes in the firms that they follow. This research report provides a sense of what’s to come, and some specific examples that demonstrate the new standard’s practical effects.

You can also use Calcbench’s Company-in-Detail page or our Multi-Company page to further research firms yourself.

It’s a big change, this new lease accounting standard. Rest assured, Calcbench is on top of it and can give you the data you need, every step of the way.