McDonald’s Corporation is one of the world’s most popular fast-food restaurants, offering good food at convenient locations. Effective management of its properties is a key to its success. McDonald’s both owns and leases property, as the following note in a recent annual report indicates:
The Company owns and leases real estate primarily in connection with its restaurant business. The Company identifies and develops sites that offer convenience to customers and long-term sales and profit potential to the Company. The Company generally owns the land and building or secures long- term leases for restaurant sites, which ensures long- term occupancy rights and helps control related costs.
Required:
Should McDonald’s report finance leases on its statement of financial position? Explain. If the obligation should be reported as a liability, how should the amount be measured?