The parent company of Google (GOOGL) is understating its future lease liabilities, offering investors an incomplete picture of its future financial obligations. In its latest 10-Q, Google says it has more than $15.6 billion in future undiscounted operating lease liabilities. But the company doesn’t count leases not yet commenced. The exclusion— which is buried in the footnotes— understates the company’s future liabilities:

“...we have entered into leases that have not yet commenced with future lease payments of $5.8 billion, excluding purchase options, that are not yet recorded on our Consolidated Balance Sheets.”

The leases commence between 2022-26.

On an undiscounted basis, Google’s $5.8 billion in not yet commenced leases are 37.1% of the company’s total future lease obligations and 5.3% of total liabilities.

Under an accounting loophole, companies can omit from the balance sheet leases that haven’t started as well as corporate offices under construction or build-to-suit arrangements. It’s seemingly inconsistent with FASB’s guidance on the topic which states if a lease is legally binding— as Google acknowledges— Topic 842 (ASU 2016-02) makes clear it must be accounted for on the balance sheet:

“A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability)...”