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Understanding Financial Adjustments: FIFO, LIFO, Leases, and Stock Options

This module provides an introduction to important financial adjustments related to inventory, operating leases, and employee stock options (ESOs). Key adjustments include the treatment of FIFO and LIFO inventory methods, the implications of off-balance sheet operating leases, and the hidden liabilities of ESOs. Notably, a liability of $187 million and an additional $8.863 million related to ESOs can significantly impact financial statements. This presentation also covers the calculation of capital leases and seeks to address any questions regarding these complex topics.

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Understanding Financial Adjustments: FIFO, LIFO, Leases, and Stock Options

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Presentation Transcript

  1. Module 11 Alysha Zimmerman

  2. Introduction

  3. Comparables

  4. 3 Types of Adjustments • Inventory- FIFO • LIFO – No adjustment necessary • Operating Leases • Not on Balance Sheet • Employee Stock Options • Huge potential liability not recorded

  5. Operating & Capital Lease Footnote

  6. Calculation of Capital Lease IRR

  7. Capitalizing Operating Leases There is an additional liability and asset of 187 million missing from the balance sheet

  8. Employee Stock Options Footnote

  9. ESO Adjustment/Calculation There is an additional liability of $8.863 million not on the Balance Sheet

  10. Questions?

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