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

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