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Using the following information, capitalize Abercrombie & Fitchs operating leases and make the appropriate adjustments...

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Accounting

Using the following information, capitalize Abercrombie & Fitchs operating leases and make the appropriate adjustments to the relevant balance sheet and income statement items. Assume an average lease term of 10 years, long-term interest rate of 11%, and tax rate of 35%.

(in 000's) 1/30/14 1/30/13
Less than 1 year $421,226 $421,577
1-3 years 715,719 758,711
3-5 years 466,589 586,752
More than 5 years 774,031 868,479
Total $2,377,025 $2,635,519
PV of Min. Obligations $1,664,562 $1,821,845

How does capitalizing operating leases impact your assessment of the long-term financial risk of the company?

Adjustments to 2/1/14

Adjustments to 2/2/13

A

L & E

A

L & E

Balance Sheet

Long-term assets

Long-term debt

Deferred taxes

Shareholders' equity

Income Statement

Cost of sales

Net interest expense

Tax expense

Net income

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