Analysis of Operating Leases
Difficulty: Advanced
An operating lease is treated like a rental contract. Neither the leased asset nor the associated liability is reported on the lessee statement of financial position, but the rights may be very similar to the rights of an owner. The lessee only records the lease payments as a rental expense in income statement.
Present Value of Future Operating Lease Payments
Comcast Corp., future operating lease payments
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Total undiscounted future operating lease payments1 (USD $ in millions) | 4,074 | 4,007 | 3,459 | 2,261 | 2,144 |
| | Discount rate2 | 4.04% | 4.50% | 4.70% | 4.95% | 4.80% |
| | Total present value of future operating lease payments (USD $ in millions) | 3,335 | 3,189 | 2,730 | 1,855 | 1,780 |
1 Source: Comcast Corp. Annual Reports
2 Weighted-average interest rate for Comcast Corp.'s debt
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at 4.04% |
|---|---|---|---|---|
| 2018 | 559 | 2018 | 559 | 537 |
| 2019 | 512 | 2019 | 512 | 473 |
| 2020 | 457 | 2020 | 457 | 406 |
| 2021 | 391 | 2021 | 391 | 334 |
| 2022 | 326 | 2022 | 326 | 267 |
| 2023 and thereafter | 1,829 | 2023 | 326 | 257 |
| 2024 | 326 | 247 | ||
| 2025 | 326 | 237 | ||
| 2026 | 326 | 228 | ||
| 2027 | 326 | 219 | ||
| 2028 | 199 | 129 | ||
| Total: | 4,074 | 4,074 | 3,335 |
1 Source: Comcast Corp. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at 4.50% |
|---|---|---|---|---|
| 2017 | 517 | 2017 | 517 | 495 |
| 2018 | 485 | 2018 | 485 | 444 |
| 2019 | 433 | 2019 | 433 | 379 |
| 2020 | 378 | 2020 | 378 | 317 |
| 2021 | 321 | 2021 | 321 | 258 |
| 2022 and thereafter | 1,873 | 2022 | 321 | 246 |
| 2023 | 321 | 236 | ||
| 2024 | 321 | 226 | ||
| 2025 | 321 | 216 | ||
| 2026 | 321 | 207 | ||
| 2027 | 268 | 165 | ||
| Total: | 4,007 | 4,007 | 3,189 |
1 Source: Comcast Corp. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at 4.70% |
|---|---|---|---|---|
| 2016 | 452 | 2016 | 452 | 432 |
| 2017 | 412 | 2017 | 412 | 376 |
| 2018 | 370 | 2018 | 370 | 322 |
| 2019 | 324 | 2019 | 324 | 270 |
| 2020 | 284 | 2020 | 284 | 226 |
| 2021 and thereafter | 1,617 | 2021 | 284 | 216 |
| 2022 | 284 | 206 | ||
| 2023 | 284 | 197 | ||
| 2024 | 284 | 188 | ||
| 2025 | 284 | 179 | ||
| 2026 | 197 | 119 | ||
| Total: | 3,459 | 3,459 | 2,730 |
1 Source: Comcast Corp. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at 4.95% |
|---|---|---|---|---|
| 2015 | 399 | 2015 | 399 | 380 |
| 2016 | 359 | 2016 | 359 | 326 |
| 2017 | 299 | 2017 | 299 | 259 |
| 2018 | 253 | 2018 | 253 | 209 |
| 2019 | 197 | 2019 | 197 | 155 |
| 2020 and thereafter | 754 | 2020 | 197 | 147 |
| 2021 | 197 | 140 | ||
| 2022 | 197 | 134 | ||
| 2023 | 163 | 106 | ||
| Total: | 2,261 | 2,261 | 1,855 |
1 Source: Comcast Corp. Annual Reports
| Year | Future operating lease payments (as reported)1 | Year | Future operating lease payments (estimated) | Present value at 4.80% |
|---|---|---|---|---|
| 2014 | 385 | 2014 | 385 | 367 |
| 2015 | 335 | 2015 | 335 | 305 |
| 2016 | 293 | 2016 | 293 | 255 |
| 2017 | 252 | 2017 | 252 | 209 |
| 2018 | 206 | 2018 | 206 | 163 |
| 2019 and thereafter | 673 | 2019 | 206 | 155 |
| 2020 | 206 | 148 | ||
| 2021 | 206 | 142 | ||
| 2022 | 55 | 36 | ||
| Total: | 2,144 | 2,144 | 1,780 |
1 Source: Comcast Corp. Annual Reports
Analyst Adjustments for Operating Leases
Comcast Corp., adjustments to financial data
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Adjustment to Total Assets | ||||||
| | Total assets (as reported) | 186,949 | 180,500 | 166,574 | 159,339 | 158,813 |
| | Add: Operating leased assets1 | 3,335 | 3,189 | 2,730 | 1,855 | 1,780 |
| | Total assets (adjusted) | 190,284 | 183,689 | 169,304 | 161,194 | 160,593 |
| Adjustment to Total Debt | ||||||
| | Total debt (as reported) | 64,556 | 61,046 | 52,621 | 48,234 | 47,847 |
| | Add: Operating lease obligations2 | 3,335 | 3,189 | 2,730 | 1,855 | 1,780 |
| | Total debt (adjusted) | 67,891 | 64,235 | 55,351 | 50,089 | 49,627 |
| Adjustment to Earnings before Interest and Tax (EBIT) | ||||||
| | EBIT3 (as reported) | 18,408 | 17,295 | 16,074 | 15,082 | 13,689 |
| | Add-back: Rent expense4 | 839 | 744 | 608 | 580 | 616 |
| | Less: Depreciation expense, operating leased assets5 | 677 | 575 | 458 | 465 | 506 |
| | EBIT (adjusted) | 18,570 | 17,464 | 16,224 | 15,197 | 13,799 |
| Adjustment to Interest Expense | ||||||
| | Interest expense (as reported) | 3,086 | 2,942 | 2,702 | 2,617 | 2,574 |
| | Add: Interest expense, operating lease obligations6 | 162 | 169 | 150 | 115 | 110 |
| | Interest expense (adjusted) | 3,248 | 3,111 | 2,852 | 2,732 | 2,684 |
1, 2 Equal to total present value of future operating lease payments. See Details »
4 Source: Comcast Corp. Annual Reports
Adjusted Ratios for Operating Leases (Summary)
Comcast Corp., adjusted ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Total Asset Turnover1 | ||||||
| | Reported total asset turnover | 0.45 | 0.45 | 0.45 | 0.43 | 0.41 |
| | Adjusted total asset turnover | 0.44 | 0.44 | 0.44 | 0.43 | 0.40 |
| Debt to Equity2 | ||||||
| | Reported debt to equity | 0.94 | 1.13 | 1.01 | 0.92 | 0.94 |
| | Adjusted debt to equity | 0.99 | 1.19 | 1.06 | 0.95 | 0.98 |
| Return on Assets3 (ROA) | ||||||
| | Reported ROA | 12.15% | 4.82% | 4.90% | 5.26% | 4.29% |
| | Adjusted ROA | 11.94% | 4.73% | 4.82% | 5.20% | 4.24% |
| Interest Coverage4 | ||||||
| | Reported interest coverage | 5.97 | 5.88 | 5.95 | 5.76 | 5.32 |
| | Adjusted interest coverage | 5.72 | 5.61 | 5.69 | 5.56 | 5.14 |
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Comcast Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Adjusted debt-to-equity | A solvency ratio calculated as adjusted total debt divided by total shareholders' equity. | Comcast Corp.'s adjusted debt-to-equity deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Comcast Corp.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Adjusted interest coverage | A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. | Comcast Corp.'s adjusted interest coverage deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Total Asset Turnover
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Revenue (USD $ in millions) | 84,526 | 80,403 | 74,510 | 68,775 | 64,657 |
| | Total assets (USD $ in millions) | 186,949 | 180,500 | 166,574 | 159,339 | 158,813 |
| | Total asset turnover1 | 0.45 | 0.45 | 0.45 | 0.43 | 0.41 |
| Adjusted for Operating Leases | ||||||
| | Revenue (USD $ in millions) | 84,526 | 80,403 | 74,510 | 68,775 | 64,657 |
| | Adjusted total assets (USD $ in millions) | 190,284 | 183,689 | 169,304 | 161,194 | 160,593 |
| | Adjusted total asset turnover2 | 0.44 | 0.44 | 0.44 | 0.43 | 0.40 |
2017 Calculations
1 Total asset turnover = Revenue ÷ Total assets
= 84,526 ÷ 186,949 = 0.45
2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= 84,526 ÷ 190,284 = 0.44
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Comcast Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Debt to Equity
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Total debt (USD $ in millions) | 64,556 | 61,046 | 52,621 | 48,234 | 47,847 |
| | Total Comcast Corporation shareholders' equity (USD $ in millions) | 68,606 | 53,943 | 52,269 | 52,711 | 50,694 |
| | Debt to equity1 | 0.94 | 1.13 | 1.01 | 0.92 | 0.94 |
| Adjusted for Operating Leases | ||||||
| | Adjusted total debt (USD $ in millions) | 67,891 | 64,235 | 55,351 | 50,089 | 49,627 |
| | Total Comcast Corporation shareholders' equity (USD $ in millions) | 68,606 | 53,943 | 52,269 | 52,711 | 50,694 |
| | Adjusted debt to equity2 | 0.99 | 1.19 | 1.06 | 0.95 | 0.98 |
2017 Calculations
1 Debt to equity = Total debt ÷ Total Comcast Corporation shareholders' equity
= 64,556 ÷ 68,606 = 0.94
2 Adjusted debt to equity = Adjusted total debt ÷ Total Comcast Corporation shareholders' equity
= 67,891 ÷ 68,606 = 0.99
| Ratio | Description | The company |
|---|---|---|
| Adjusted debt-to-equity | A solvency ratio calculated as adjusted total debt divided by total shareholders' equity. | Comcast Corp.'s adjusted debt-to-equity deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Return on Assets (ROA)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net income attributable to Comcast Corporation (USD $ in millions) | 22,714 | 8,695 | 8,163 | 8,380 | 6,816 |
| | Total assets (USD $ in millions) | 186,949 | 180,500 | 166,574 | 159,339 | 158,813 |
| | ROA1 | 12.15% | 4.82% | 4.90% | 5.26% | 4.29% |
| Adjusted for Operating Leases | ||||||
| | Net income attributable to Comcast Corporation (USD $ in millions) | 22,714 | 8,695 | 8,163 | 8,380 | 6,816 |
| | Adjusted total assets (USD $ in millions) | 190,284 | 183,689 | 169,304 | 161,194 | 160,593 |
| | Adjusted ROA2 | 11.94% | 4.73% | 4.82% | 5.20% | 4.24% |
2017 Calculations
1 ROA = 100 × Net income attributable to Comcast Corporation ÷ Total assets
= 100 × 22,714 ÷ 186,949 = 12.15%
2 Adjusted ROA = 100 × Net income attributable to Comcast Corporation ÷ Adjusted total assets
= 100 × 22,714 ÷ 190,284 = 11.94%
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Comcast Corp.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Interest Coverage
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Earnings before interest and tax1 (EBIT) (USD $ in millions) | 18,408 | 17,295 | 16,074 | 15,082 | 13,689 |
| | Interest expense (USD $ in millions) | 3,086 | 2,942 | 2,702 | 2,617 | 2,574 |
| | Interest coverage2 | 5.97 | 5.88 | 5.95 | 5.76 | 5.32 |
| Adjusted for Operating Leases | ||||||
| | Adjusted EBIT (USD $ in millions) | 18,570 | 17,464 | 16,224 | 15,197 | 13,799 |
| | Adjusted interest expense (USD $ in millions) | 3,248 | 3,111 | 2,852 | 2,732 | 2,684 |
| | Adjusted interest coverage3 | 5.72 | 5.61 | 5.69 | 5.56 | 5.14 |
2017 Calculations
2 Interest coverage = EBIT ÷ Interest expense
= 18,408 ÷ 3,086 = 5.97
3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest expense
= 18,570 ÷ 3,248 = 5.72
| Ratio | Description | The company |
|---|---|---|
| Adjusted interest coverage ratio | A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. | Comcast Corp.'s adjusted interest coverage ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Estimation of Depreciation Expense, Operating Leased Assets
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Rent expense1 | 839 | 744 | 608 | 580 | 616 |
| | Less: Estimated interest expense, operating lease obligations2 | 162 | 169 | 150 | 115 | 110 |
| | Estimated depreciation expense, operating leased assets | 677 | 575 | 458 | 465 | 506 |
1 Source: Comcast Corp., Annual Reports
Estimation of Interest Expense, Operating Lease Obligations
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Operating leased assets, at beginning of year1 (USD $ in millions) | 4,012 | 3,763 | 3,188 | 2,320 | 2,287 |
| | Discount rate2 | 4.04% | 4.50% | 4.70% | 4.95% | 4.80% |
| | Estimated interest expense, operating lease obligations3 (USD $ in millions) | 162 | 169 | 150 | 115 | 110 |
2 Weighted-average interest rate for Comcast Corp.'s debt
2017 Calculations
3 Estimated interest expense, operating lease obligations = Operating leased assets, at beginning of year × Discount rate
= 4,012 × 4.04% = 162
Present Value of Operating Lease Payments, at Beginning of Year
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Total present value of future operating lease payments1 (USD $ in millions) | 3,335 | 3,189 | 2,730 | 1,855 | 1,780 |
| | Rent expense2 (USD $ in millions) | 839 | 744 | 608 | 580 | 616 |
| | Discount rate3 | 4.04% | 4.50% | 4.70% | 4.95% | 4.80% |
| | Total present value of operating lease payments, at beginning of year4 (USD $ in millions) | 4,012 | 3,763 | 3,188 | 2,320 | 2,287 |
1 Equal to total present value of future operating lease payments. See Details »
2 Source: Comcast Corp., Annual Reports
3 Weighted-average interest rate for Comcast Corp.'s debt
2017 Calculations
4 Total present value of operating lease payments, at beginning of year = (Total present value of future operating lease payments + Rent expense) ÷ (1 + Discount rate)
= (3,335 + 839) ÷ (1 + 4.04%) = 4,012