How are finance leases classified on Aplus's consolidated balance sheets?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
we determine if the arrangement is a lease or contains an embedded lease and review the facts and circumstances of the arrangement to classify leased assets as operating or finance under Topic 842. The Partnership has elected not to record any leases with terms of 12 months or less on our consolidated balance sheets.
At this time, the majority of active leases within our portfolio are classified as operating leases. Operating leases are included in operating lease right-of-use assets, net, operating lease current liabilities and operating lease non-current liabilities on our consolidated balance sheets. Finance leases represent a small portion of the active lease agreements and are included in other non-current assets and long-term debt, net on our consolidated balance sheets.
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, finance leases represent a small portion of their active lease agreements. These finance leases are included in "other non-current assets and long-term debt, net" on Aplus's consolidated balance sheets.
In contrast, the majority of Aplus's active leases are classified as operating leases. These operating leases are included in "operating lease right-of-use assets, net, operating lease current liabilities and operating lease non-current liabilities" on their consolidated balance sheets. This distinction is important for understanding how Aplus manages and reports its lease obligations.
For a prospective franchisee, this means that if Aplus enters into a finance lease, the asset obtained through the lease will be recorded as a non-current asset, and the corresponding lease obligation will be recorded as long-term debt. This treatment affects Aplus's balance sheet ratios and overall financial presentation, which could be relevant for investors or lenders assessing the company's financial health. The FDD also indicates that Aplus has elected not to record any leases with terms of 12 months or less on their consolidated balance sheets.