An annual report of Crestwood Industries states, “The company and its subsidiaries have long-term leases expiring on various dates after December 31, 2017. Amounts payable under such commitments, without reduction for related rental income, are expected to average approximately \(5,711,000 annually for the next 3 years. Related rental income from certain subleases to others is estimated to average \)3,094,000 annually for the next 3 years.” What information is provided by this note?

An annual report refers to a financial assessment of a company's operations,including the transaction completed in a fiscal year, as well as an evaluation of management's current financial position and future plans.

The reader should be aware that the company has made an annual commitment to lease payments in the amount of $5,711,000 for the next three years. In some cases, this information is critical in making decisions:

1. The firm's ability to employ further hirefinance; and
2. The form of developing obligations and the amount of cash to be used.

Off-balance-sheet financing often occurs, and the investor should be aware that the firm has a commitment, even if it is not shown in the risk section of the balance sheet. Rental revenue from sublease agreements is also useful in determining a company's ability to earn money in the near future.