Assignment #1 – Lease Accounting Spring 2016

ACCT 501 Financial Accounting Issues

Assignment #1 – Lease Accounting Spring 2016

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 Assignment #1 Overview

The objective of the assignment is for you to improve your understanding of financial accounting and reporting for leases by: a) examining how current lease accounting and reportingstandards apply to a real-life company; and b) gaining some insight into the lease accounting standards (ASU 2016-02issued February 25, 2016). In addition, this graded assignment is intended to help you improve your written and oral communication skills.This is an individual, not a group, assignment. You will also share your answers in class on the due date indicated. This sharing will not require a formal presentation.

Based on the following documents, you will answer 13questions as listed below:

• Questions #1 – 11: See Form 10-K for Walgreens Boots Alliance, Inc. for the fiscal year ending August 31, 2015 and filed with the Securities and Exchange Commission on October 28, 2015. To access, go to the company website, click on Investor Relations and then on SEC Filings.

• Question #12 – 13: See the FASB/ASU 2016-02 Leases Issued February 25, 2016 (Summary pages 1 – 6). To access, go to the FASB website, click on Projects, then Recently Completed Projects, then scroll down to Leases and click on Section A.

Listed below are optional resources that may be helpful in understanding the new FASB/ASU:

• Read “FASB In Focus – a summary of the ASU” on the FASB website.
• Read “FASB: Understanding Costs and Benefits” on the FASB website.
• Watch the FASB video: “Why a New Leases Standards?”
• Press Release on February 25, 2016 on the FASB website.
• NOTE: There is also a live FASB webcast on Tuesday, March 29, at 10 a.m. – 11 a.m. You will need to register for the live webcast. If you are not available at this time, then the webcast may be archived on the FASB website.
• The CPA Journal, “Preparing for the Looming Changes in Lease Accounting,” by Chambers, D., Dooley, J., & Finger, C.A. January 2015, pages 38 – 42. To access, go to the Wilson Library data base.

 Format

The format of your report is to follow the outline of the questions included in this handout.  In your report, state the question or item immediately followed by your answer.  Reference the document and page number(s) where you found your answer. Do not copy and paste large sections from the document. Your answers must be in your own words, concise and to the point. Your report should not exceed five pages.

 Deadline

This assignment is due to Blackboard by Monday, April 11 at 5 p.m. Then at 6 p.m. you are to bring to class two paper copies of your answers, one of which you will keep and the other you will give to your instructor.

Grading criteria

This assignment is worth 125 points which is 15.6% of your course grade. Your grade will comprise two components:  a) your written answers (90% weighting) and b) your participation in the in-class sharing activity (10% weighting). Your written answers will be evaluated in terms of accuracy, completeness, organization, and proper language. Your participation in the in-class sharing activity is an important part of your learning process. You will be evaluated on your display of professionalism, enthusiasm, and confidence.

 Assignment Questions

Include in your report your concise answers to the questions listed below.

Per Walgreens Boots Alliance Form 10-K:

1.How are the Company’s leases classified?

2. What might be the impact on the Company if appropriate store locations with acceptable lease terms cannot be found?

3. When does a lease term commence and how are the lease amounts determined?

4. What was disclosed about the minimum rental commitments under leases?
5. What items are included in rental expenses under lease arrangements?

6. What did the company disclose about sale-leaseback transactions?

7. What lease information was disclosed in the statement of cash flows?

8.What type of information did the Company disclose about its leasehold improvements?

9. Where are lease termination costs recorded?

10. How is the liability determined for future costs related to closed locations?

11. Does the company anticipate that they may be adversely impacted by new lease accounting standards? Explain.

Per FASB/ASU 2016-02:

12. Identify three or four major changes under the new lease accounting standards.

13. hat do you believe might be the key problems and challenges for the Company in implementing the new lease accounting standards?

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