Footnote 7 of Ann Taylor Stores Corp.’s financial statements for fiscal year 2012 contains the following information:
7. Commitments and Contingencies
Operating Leases
The Company occupies its retail stores and administrative facilities under operating leases, most of which are noncancelable. Some of the store leases grant the Company the right to extend the term for one or two additional five-year periods under substantially the same terms and conditions as the original leases. Some store leases also contain early termination options, which can be exercised by the Company under specific conditions. Most of the store leases require payment of a specified minimum rent, plus contingent rent based on a percentage of the store’s net sales in excess of a specified threshold. The Company also leases certain office equipment for its corporate offices and store locations under noncancelable operating leases which generally have three-year terms.
Future minimum lease payments under noncancelable operating leases as of January 29, 2013, are as follows:
Fiscal Year (in thousands)
2013 ..........................................................$ 177,337
2014 .......................................................... 160,110
2015 .......................................................... 149,471
2016 .......................................................... 136,073
2017 .......................................................... 118,096
Thereafter.................................................. 306,139
Total.......................................................... 1,047,226
Sublease rentals.......................................... 24,351
Net rentals.................................................$1,022,875

Requirements
1. Interpret the information in the footnote. What rights does the company have? What obligations?
2. Are the rights and obligations discussed in requirement 1 reported in the liability section of the balance sheet? Why or why not? How does this impact the company’s debt and leverage ratios?
3. How is this type of reporting likely to change in the future?