Walgreens Boots Alliance, Inc. is a global pharmacy-led health and well-being enterprise. It has 13,100 stores in 11 countries. Walgreens Boots Alliance was incorporated in 2014 and is the successor to Walgreen Co., which was originally incorporated in 1909. The company is based in Deerfield, Illinois. Walgreens Boots Alliance's 2015 income statement reports the following: Net sales of $103,444 million, interest expense of $605 million, and net income of $4,279 million. The company has a 25.7% effective tax rate. The August 31, 2015, balance sheet showed $68,782 million of assets and liabilities of $37,482 million. Excerpts from the 2015 annual report that relate to leases are reported below:
5. Leases
Initial terms for leased premises in the U.S. are typically 15 to 25 years, followed by additional terms containing renewal options at five-year intervals, and may include rent escalation clauses. Non-U.S. leases are typically for shorter terms and may include cancellation clauses or renewal options. The commencement date of all lease terms is the earlier of the date the Company becomes legally obligated to make rent payments or the date the Company has the right to control the property. The Company recognizes rent expense on a straight-line basis over the term of the lease. In addition to minimum fixed rentals, some leases provide for contingent rentals based upon a portion of sales.
Annual minimum rental commitments under all leases having an initial or remaining non-cancelable term of more than one year are shown below (in millions):

Rental expense, which include common area maintenance, insurance and taxes, where appropriate, was as follows (in millions):

Required:
All questions relate to 2015 unless stated otherwise.
1. Compute Walgreens Boots Alliance's debt-to-equity ratio and return-on-assets ratio using reported numbers for fiscal 2015.
2. Assume that the amount of Walgreens Boots Alliance's operating lease payments due each year after 2020 are equal and are paid at the end of each fiscal year. Assume that all of the "Later" amount of $23,625 is spread over 9 years. Using an interest rate of 5%, calculate the present value of the operating lease payments at August 31, 2015.
3. Make the journal entry that would be necessary at August 31, 2015, to put the operating leases on the balance sheet under ASU 2016-02 (ASC 842).
4. Based on your answer to requirement 3, make the necessary journal entries related to the income statement and balance sheet for the fiscal year ended August 31, 2016, assuming the leases are treated as operating leases under ASU 2016-02.
5. Recalculate the total debt to shareholders' equity ratio under ASU 2016-02 based on your answer to requirement 3.
6. Recalculate the return on assets. Use the income information that you computed for requirement 4.
7. Comment on the differences between the ratios in requirement 1 and the recomputed ratios in requirements 5 and 6.
8. Explain how your answer to requirement 7 would change if the lease were accounted for under IFRS 16.

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Capital Lease Operating Lease 2016 2017 2018 2019 2020 Later S 69 65 62 60 61 881 S 3,141 3,008 2,944 2,734 2,518 23,625 $37,970 Total minimum lease payments SL.198 2015 2014 S 2,687 (22) 2013 Minimum rentals Contingent rentals Less: Sublease rental income 3,176 38 (46) 3,168 DGAD S 2,628