This case focuses on Whole Foods Market Inc. and how it accounts for its leases, in particular whether or not it should capitalize its operating leases. The case write-up includes a company history, Whole Foods Market property, and the accounting controversy related to FASB Statement No. 13. The case also includes various exhibits for the user to analyze: Whole Foods stock price graph; various Whole Foods financial statements; Whole Foods footnotes on growth strategy, properties, property and equipment, and leases; and Whole Foods financial highlights.
The objective of this case is for the user to better understand lease accounting, specifically the implication of off balance sheet liabilities on a company's financial performance. Also, the user is asked to answer three questions: 1) Is Whole Foods underreporting its liabilities and assets; 2) Should analysts recast the financials by capitalizing the operating leases; and 3) What are the relevant factors to consider when making such decisions?