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Using Graphical Data to Interpret Operating Lease Footnotes The following graphics relate to operating leases for S&P 500 firms from 2010 through 2018. The data come from the period before the new lease standards because most firms adopted the standard in fiscal 2019 (the first mandated year). Present values are calculated with a 5% discount rate.

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Required a. Consider the top left panel. 1. What pattern do we observe for the overall level of operating leases overtime? Answer Choices:

The present value of operating leases as increased each year prior to the new lease standard.

The present value of operating leases as decreased each year prior to the new lease standard.

The present value of operating leases as increased each year after the new lease standard.

The present value of operating leases as decreased each year after the new lease standard. 2. How does this affect our analysis of a companys leverage? Answer Choices"

Increases transparency

Decreases transparency

Doesn't impact transparency b. Consider the bottom right panel. Which industrial sector has the most operating leases? Answer Choices:

Consumer discretionary

Consumer staples

Energy

Financials

Healthcare

Industrials

Information technology

Materials

Real estate

Telecommunications

Utilities c. Consider the top right panel. Which industrial sector has the largest average operating leases? Answer Choices:

Consumer discretionary

Consumer staples

Energy

Financials

Healthcare

Industrials

Information technology

Materials

Real estate

Telecommunications

Utilities d. Consider the pie chart that shows lease payments by year (bottom left panel). Which sector has the longest lease terms? Answer Choices:

Consumer discretionary

Consumer staples

Energy

Financials

Healthcare

Industrials

Information technology

Materials

Real estate

Telecommunications

Utilities

Total Present Value of Future Lease Payments Present Value of Future Lease Payments 2018 2017 2016 $10B 2015 2014 $5B 2013 2012 SOB 2011 Energy Financial Us 2010 $OB Consumer Staples Telecomunication $200B $400B $600B Consumer Discretionary Industriais Information Technology Real Estate Healthcare Total Present Value of Future Lease Payments 5th Year 4th Year Thereafter Total Present Value of Future Lease Payments Real Estate Healthcare Energy Consumer Discretionary Telecomunications ... 3rd Year - Industrials Industrials - 1st Year 2nd Year Information Technology Consumer Staples

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