ningning1984

If you capitalize some payments , you effectively treat them as debt and the payments on it are not an operating expense.

If you avoid capitalizing them , as WalMart and some others like JetBlue have done , you treat it as lease payments i.e. rentals, which are operating expense.

Your choice will drive higher EBIT ( capitalizing ) or lower EBIT ( leasing/renting ).

You may ask why anyone would do that. Its to show less assets on your bs and therefore show less leverag, making you look better to a foolish investment community



Edited 1 time(s). Last edit at Thursday, June 3, 2010 at 11:08PM by janakisri.