1. How will Walgreen’s leases impact its financial position under the new FASB lease standard?
Original blog posting (November 22, 2016)

2. Walgreens
FASB issued new guidance for leases requiring companies to book both an asset and a liability
Walgreens is estimated to be hit the hardest
Has over $30 billion in operating lease obligations
Estimates of how much will have to be included on its balance sheet range from $ $33.7 billion

3. Question 1
Why do you think FASB revised this lease standard?

4. Question 2
Assume that Walgreens puts the total amount of its leases into a long-term lease asset on its balance sheet and the offsetting credit is partially to a short-term liability (for lease payments due in the next year) and the remainder to a long-term liability. What will be the likely impact on Walgreen’s return on assets (increase, decrease, or no effect)? Explain.

5. Question 3
Again, assume the lease amount is booked as a debit to a long-term asset, and the credits to both a short-term liability and a long-term liability. What will be the likely impact on Walgreen’s current ratio (increase, decrease, or no effect)? Explain.

6. Question 4
Is the impact of the new lease accounting standard going to be material for Walgreens? How do you know?

7. Question Recap Why do you think FASB revised this lease standard?
Assume that Walgreens puts the total amount of its leases into a long-term lease asset on its balance sheet and the offsetting credit is partially to a short-term liability (for lease payments due in the next year) and the remainder to a long- term liability. What will be the likely impact on Walgreen’s return on assets (increase, decrease, or no effect)? Explain.
Again, assume the lease amount is booked as a debit to a long-term asset, and the credits to both a short-term liability and a long-term liability. What will be the likely impact on Walgreen’s current ratio (increase, decrease, or no effect)? Explain.
Is the impact of the new lease accounting standard going to be material for Walgreens? How do you know?

8. For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at Questions or comments? Contact Dr. Wendy Tietz at