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International Business Machines Corp. (IBM)
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
- Analyst Adjustments for Operating Leases
- Adjusted Ratios for Operating Leases (Summary)
- Adjusted Total Asset Turnover
- Adjusted Debt to Equity
- Adjusted Return on Assets (ROA)
- Adjusted Interest Coverage
- Estimation of Depreciation Expense, Operating Leased Assets
- Estimation of Interest Expense, Operating Lease Obligations
- Present Value of Operating Lease Payments, at Beginning of Year
Present Value of Future Operating Lease Payments
International Business Machines Corp., future operating lease payments
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
1 Weighted-average interest rate for International Business Machines Corp.’s debt
| Year | Future operating lease payments (as reported) | Year | Future operating lease payments (estimated) | Present value at |
|---|---|---|---|---|
| 2019 | |
2019 | |
|
| 2020 | |
2020 | |
|
| 2021 | |
2021 | |
|
| 2022 | |
2022 | |
|
| 2023 | |
2023 | |
|
| 2024 and thereafter | |
2024 | |
|
| 2025 | |
|
||
| Total: | |
|
|
Based on: 10-K (filing date: 2019-02-26).
| Year | Future operating lease payments (as reported) | Year | Future operating lease payments (estimated) | Present value at |
|---|---|---|---|---|
| 2018 | |
2018 | |
|
| 2019 | |
2019 | |
|
| 2020 | |
2020 | |
|
| 2021 | |
2021 | |
|
| 2022 | |
2022 | |
|
| 2023 and thereafter | |
2023 | |
|
| 2024 | |
|
||
| Total: | |
|
|
Based on: 10-K (filing date: 2018-02-27).
| Year | Future operating lease payments (as reported) | Year | Future operating lease payments (estimated) | Present value at |
|---|---|---|---|---|
| 2017 | |
2017 | |
|
| 2018 | |
2018 | |
|
| 2019 | |
2019 | |
|
| 2020 | |
2020 | |
|
| 2021 | |
2021 | |
|
| 2022 and thereafter | |
2022 | |
|
| 2023 | |
|
||
| Total: | |
|
|
Based on: 10-K (filing date: 2017-02-28).
| Year | Future operating lease payments (as reported) | Year | Future operating lease payments (estimated) | Present value at |
|---|---|---|---|---|
| 2016 | |
2016 | |
|
| 2017 | |
2017 | |
|
| 2018 | |
2018 | |
|
| 2019 | |
2019 | |
|
| 2020 | |
2020 | |
|
| 2021 and thereafter | |
2021 | |
|
| 2022 | |
|
||
| Total: | |
|
|
Based on: 10-K (filing date: 2016-02-23).
| Year | Future operating lease payments (as reported) | Year | Future operating lease payments (estimated) | Present value at |
|---|---|---|---|---|
| 2015 | |
2015 | |
|
| 2016 | |
2016 | |
|
| 2017 | |
2017 | |
|
| 2018 | |
2018 | |
|
| 2019 | |
2019 | |
|
| 2020 and thereafter | |
2020 | |
|
| 2021 | |
|
||
| Total: | |
|
|
Based on: 10-K (filing date: 2015-02-24).
Analyst Adjustments for Operating Leases
International Business Machines Corp., adjustments to financial data
USD $ in millions
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
1, 2 Equal to total present value of future operating lease payments. See Details »
International Business Machines Corp., Financial Data: Reported vs. Adjusted
Adjusted Ratios for Operating Leases (Summary)
International Business Machines Corp., adjusted ratios
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | International Business Machines Corp.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
| Adjusted debt-to-equity | A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. | International Business Machines Corp.’s adjusted debt-to-equity deteriorated from 2016 to 2017 and from 2017 to 2018. |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | International Business Machines Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
| Adjusted interest coverage | A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. | International Business Machines Corp.’s adjusted interest coverage deteriorated from 2016 to 2017 and from 2017 to 2018. |
International Business Machines Corp., Ratios: Reported vs. Adjusted
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Total asset turnover = Revenue ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | International Business Machines Corp.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
Adjusted Debt to Equity
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Debt to equity = Total debt ÷ Total IBM stockholders’ equity
= ÷ =
2 Adjusted debt to equity = Adjusted total debt ÷ Total IBM stockholders’ equity
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted debt-to-equity | A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity. | International Business Machines Corp.’s adjusted debt-to-equity deteriorated from 2016 to 2017 and from 2017 to 2018. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2018 Calculations
1 ROA = 100 × Net income attributable to IBM ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Net income attributable to IBM ÷ Adjusted total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | International Business Machines Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
Adjusted Interest Coverage
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2018 Calculations
2 Interest coverage = EBIT ÷ Interest expense
= ÷ =
3 Adjusted interest coverage = Adjusted EBIT ÷ Adjusted interest expense
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted interest coverage ratio | A solvency ratio calculated as adjusted EBIT divided by adjusted interest payments. | International Business Machines Corp.’s adjusted interest coverage ratio deteriorated from 2016 to 2017 and from 2017 to 2018. |
Estimation of Depreciation Expense, Operating Leased Assets
USD $ in millions
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Rental expense | |
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|
|
|
| Less: Estimated interest expense, operating lease obligations1 | |
|
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| Estimated depreciation expense, operating leased assets | |
|
|
|
|
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
Estimation of Interest Expense, Operating Lease Obligations
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2 Weighted-average interest rate for International Business Machines Corp.’s debt
2018 Calculations
3 Estimated interest expense, operating lease obligations = Operating leased assets, at beginning of year × Discount rate
= × =
Present Value of Operating Lease Payments, at Beginning of Year
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
1 Equal to total present value of future operating lease payments. See Details »
2 Weighted-average interest rate for International Business Machines Corp.’s debt
2018 Calculations
3 Total present value of operating lease payments, at beginning of year = (Total present value of future operating lease payments + Rental expense) ÷ (1 + Discount rate)
= ( + ) ÷ (1 + ) =