Analyzing, Interpreting and Capitalizing Operating Leases Total S.A. is a French multinational oil company and one of the six “supermajor” oil companies in the world. The company is headquartered in Courbevoie, France, and uses IFRS to prepare its financial statements. Total S.A. reports the following footnote relating to its finance and operating leases in its 2015 20-F report (€ millions).

The Group leases real estate, retail stations, ships, and other equipment. The future minimum lease payments on operating and finance leases to which the Group is committed are shown as follows:

For year ended December 31, 2015 (€ millions) Operating Leases Finance Leases 2016 €1,430 € 57 2017 1,049 23 2018 784 23 2019 550 23 2020 442 23 2021 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,718 242 Total minimum payments . . . . . . . . . . . . . . . . . . . . . . €5,973 €391 On December 31, 2015, the present value of minimum lease payments under finance leases was

€336 million.

a. Confirm that the implicit rate of Total’s finance leases is 2.07%.

b. Use 2.07% as the discount rate and round the remaining lease term to three decimals to compute the present value of Total’s operating leases.

c. Describe the adjustments we might consider to Total’s balance sheet and income statement using the information from part b.

d. Total reported total liabilities of €129,075 million for 2015. Are these finance leases substantial?
Would capitalizing the operating leases make a difference to our assessment of Total’s liquidity or solvency?