A little confusion: Prof is saying we no longer need to do the adjustment for operating leases, since this is being done by accountants now. Accountants do show operating leases as debt, but they still treat operating lease payment as operating expense. I think we still need to adjust operating income by excluding interest portion of the lease payment. Anybody can clarify?
Interest portion of the lease payment is now part of Interest expense under the P&L statement. So the interest portion will not be a part of your operating income.
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A little confusion: Prof is saying we no longer need to do the adjustment for operating leases, since this is being done by accountants now. Accountants do show operating leases as debt, but they still treat operating lease payment as operating expense. I think we still need to adjust operating income by excluding interest portion of the lease payment. Anybody can clarify?
Interest portion of the lease payment is now part of Interest expense under the P&L statement. So the interest portion will not be a part of your operating income.