Analyzing and Interpreting Footnote on Both Operating and Capital Leases Verizon

Question

Analyzing and Interpreting Footnote on Both Operating and Capital Leases Verizon Communications Inc. provides the following footnote relating to its leasing activities in its 10-K report. The aggregate minimum rental commitments under noncancelable leases for the periods shown at December 31, 2014, are: Capital Operating Leases Leases (in millions) $181 137 113 68 39 60 2015 2016 2017 2018 2019 Thereafter Total minimum rental commitments Less interest and executory costs Present value of minimum lease payments Less current installments Long-term obligation at December 31, 2014 $2,499 2,245 1,960 1,660 1,369 4,670 598 $14,403 82 516 158 $358

Explanation / Answer

Present value of Verizon's operating leases will be calculated as follows:

Therefore, the present value of Verizon's operating leases is $12,207 million.

(A) (B) (AxB) Year Operating Lease Discount Factor at 5% Present value 2015 2499 0.9524 2380 2016 2245 0.9070 2036 2017 1960 0.8638 1693 2018 1660 0.8227 1366 2019 1369 0.7835 1073 Thereafter 4670 0.7835 3659 Total 12207

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