Appendix: ASC 842 Illustrative Examples
The following table lists the examples from ASC 842publication that Nakisa Lease Administration supports:
| Example from US GAAP | Description | Supported by Nakisa Lease Administration |
|---|---|---|
|
Example 1 - Case A |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 1 - Case B |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 2 - Concession Space |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 3A - Fibre Optic Cable |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 3B - Fibre Optic Cable |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 4 - Retail Unit |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 5 - Truck rental |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 6A - Ship |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 6B - Ship |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 7 - Aircraft |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 8 - Contract for shirts |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 9A - Contract for energy/power |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 9B - Contract for energy/power |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 9C - Contract for energy/power |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 10A - Contract for network services |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 10B - Contract for network services |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 11A - Lessee allocation of consideration to lease and non-lease components of a contract |
Illustrates the allocation of consideration in a contract to lease and non-lease components by a lessee. |
Yes Allocation should be done prior to entering data into the system and final values based on allocation for lease and non-lease components should be entered into the system. From there, the system will support the necessary calculations and postings. |
|
Example 11B - Lessee allocation of consideration to lease and non-lease components of a contract |
Illustrates the allocation of consideration in a contract to lease and non-lease components by a lessee. |
Yes Allocation should be done prior to entering data into the application and final values based on allocation for lease and non-lease components should be entered into the application. From there, the application will support the necessary calculations and postings. Difference between this example and 11A is the use of the practical expedient not to separate the non-lease component. This again can be determined prior to entering information in the application and once this allocation is determined, final numbers can be inputted into the application. |
|
Example 12A- Activities or Costs that are not Components of a Contract |
Illustrates the treatment for when real estate tax payments are variable. |
Yes |
|
Example 12B- Activities or Costs that are not Components of a Contract |
Illustrates the treatment for when real estate tax payments are fixed. |
Yes |
|
Example 12 C - Activities or Costs that are not Components of a Contract |
Illustrates the treatment for when real estate tax payments are fixed. |
Yes Allocation should be done prior to entering data into the application and final values based on allocation for lease and non-lease components should be entered into the application. From there, the application will support the necessary calculations and postings. |
|
Example 13 - Lease of a Turbine Plant |
Illustrates how a lessee accounts for a lease which includes multiple assets and land as a single lease component. |
Yes This scenario is supported. However, the use of judgment prior to inputting the scenario into the application is required to conclude that the multiple assets should in fact be treated as one lease component. |
|
Example 14A - Determining the consideration in the Contract- Variable Payments |
Illustrate the lessee will account for fixed and variable payments based on allocations to lease and non-lease components. |
Yes This scenario is supported. However, the use of judgment prior to inputting the scenario into the application is required to conclude that the multiple assets should in fact be treated as one lease component. |
|
Example 14B - Determining the consideration in the Contract- Variable Payments |
Illustrate the lessee will account for fixed and variable payments based on allocations to lease and non-lease components. |
Yes This scenario is supported. However, the use of judgment prior to inputting the scenario into the application is required to conclude that the multiple assets should in fact be treated as one lease component. |
|
Example 14C - Determining the consideration in the Contract- Variable Payments |
Illustrate the lessee will account for fixed and variable payments based on allocations to lease and non-lease components. |
Yes This scenario is supported. However, the use of judgment prior to inputting the scenario into the application is required to conclude that the multiple assets should in fact be treated as one lease component. |
|
Example 15 - Modification Accounted for as a Separate Contract |
Illustrate the requirements of ASC 842 regarding lease modifications for a lessee which lead to a new lease. |
Yes The application can support this scenario. However, judgment needs to be used prior to processing the modification to determine whether it is or is not a new lease. If it is a new lease, user needs to create a new contract and should not amend the initial one. |
|
Example 16A - Modification that Increases the Lease Term |
Illustrate the requirements of ASC 842 regarding lease modifications for a lessee which increases the lease term. No change in lease classification. |
Yes |
|
Example 16B - Modification that Increases the Lease Term |
Illustrate the requirements of IFRS 16 regarding lease modifications for a lessee which increases the lease term. Change in lease classification |
No Lease reclassification (Operating to Finance and vice-versa) is within the scope of future enhancements. |
|
Example 17 - Modification that Grants additional Right of Use |
Illustrate the requirements of ASC 842 regarding lease modifications for a lessee. |
Yes The application can support this scenario. However, judgment needs to be used prior to processing the modification to determine whether it is or is not a new lease. If it is a new lease, user needs to create a new contract and should not amend the initial one. |
|
Example 18A - Modification that decreases the scope of the lease |
Illustrate the requirements of ASC 842 regarding a decrease in scope. |
Yes |
|
Example 18B - Modification that decreases the scope of the lease |
Illustrate the requirements of ASC 842 regarding a decrease in scope. |
Yes |
|
Example 19 - Modification that changes lease payments only |
Illustrate the requirements of ASC 842 regarding lease modifications for a lessee. |
Yes |
|
Example 20 - Increase in scope of an operating lease that is not a separate lease and not change lease classification |
Illustrate the requirements of ASC 842 regarding lease modifications for a lessee. |
Yes |
|
Example 21A - Modification of an operating lease that changes lease classification |
Illustrate the requirements of ASC 842 regarding lease modifications for a lessee. |
No |
|
Example 21B - Modification of an operating lease that changes lease classification |
Illustrate the requirements of ASC 842 regarding lease modifications for a lessee. |
No |
|
Example 22A - Modification of a Direct Financing Lease |
Illustrates the requirements of ASC 842 regarding a modification for a direct financing lease. |
No |
|
Example 22B - Modification of a Direct Financing Lease |
Illustrates the requirements of ASC 842 regarding a modification for a direct financing lease. |
No |
|
Example 22C - Modification of a Direct Financing Lease |
Illustrates the requirements of ASC 842 regarding a modification for a direct financing lease. |
No |
|
Example 23 - Lessee Purchase Option |
Illustrates the requirements of ASC 842 regarding purchase options. |
Yes |
|
Example 24- Lessee Purchase Option |
Illustrates the requirements of ASC 842 regarding purchase options. |
Yes |
|
Example 25A - Variable lease Payments that Depend on an Index or a Rate and Variable Lease payments Linked to Performance |
Illustrates the requirements of ASC 842 regarding CPI. |
Yes |
|
Example 25B - Variable lease Payments that Depend on an Index or a Rate and Variable Lease payments Linked to Performance |
Illustrates the requirements of ASC 842 regarding CPI. |
Yes In this example, there is a variable portion linked to sales. User will have to input the final number calculated based on numbers into the application. From there, the application will support the variable portion not being included in the calculation of the ROU asset & liability. |
|
Example 26 - Termination Penalties |
Illustrates the requirements of ASC 842 regarding termination penalties. |
Yes |
|
Example 27 - Initial Direct Costs |
Illustrates the requirements of ASC 842 regarding initial direct costs. |
Yes |
|
Example 28 - Lessee Transition - Existing Capital Lease |
Illustrates the requirements of ASC 842 regarding transition. |
Yes |
|
Example 29 - Lessee Transition - Existing Operating Lease |
Illustrates the requirements of ASC 842 regarding transition. |
Yes |
Examples starting in Paragraph 842-20-55-13
| Example from US GAAP | Description |
Supported by Nakisa Lease Administration |
|---|---|---|
|
Example 1 - Short Term Lease |
Illustrate how an entity determines whether a contract is, or contains, a lease. |
Yes |
|
Example 2 - Portfolio Approach to Establishing the Discount Rate for the Lease |
Illustrate how to apply a discount rate to a portfolio of leases |
No |
|
Example 3A - Initial and Subsequent Measurement by a Lessee and Accounting for a Change in Lease Term (if lease is a finance lease) |
Illustrate how to account for subsequent measurement per ASC 842. |
Yes |
|
Example 3A- Initial and Subsequent Measurement by a Lessee and Accounting for a Change in Lease Term (if lease is an operating lease) |
Illustrate how to account for subsequent measurement per ASC 842. |
Yes |
|
Example 3B - Initial and Subsequent Measurement by a Lessee and Accounting for a Change in Lease Term |
Illustrate how to account for a change in lease term per ASC 842. |
Yes |
|
Example 4 - Recognition and Initial and Subsequent Measurement by a Lessee in an Operating Lease |
Illustrate how to account for subsequent measurement per ASC 842. |
Yes |
|
Example 5 - Impairent of a Right of Use Asset in an Operating Lease |
Illustrate how to account for impairment as per ASC 842. |
Yes |
|
Nakisa Lease Administration 2022.R2-SP © 2024
|
Nakisa Inc. All rights reserved worldwide. |