Chapter 13 - Solution Manual

Specify significant operating policies and procedures

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specify significant operating policies and procedures in the arrangement with the owner-seller having no ability to change such policies and procedures. [EITF 01-08, paragraph DISCUSSION, sequence 45.1.1] ][ A requirement to follow prudent operating
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286 practices (or other similar requirements) generally does not convey the right to control the underlying property, plant, or equipment. [EITF 01-08, paragraph DISCUSSION, sequence 45.1.2] ][ Similarly, a contractual requirement designed to enable the purchaser to monitor or ensure the seller's compliance with performance, safety, pollution control, or other general standards generally does not establish control over the underlying property, plant, or equipment. [EITF 01-08, paragraph DISCUSSION, sequence 45.2] ] b. [The purchaser has the ability or right to control physical access to the underlying property, plant, or equipment while obtaining or controlling more than a minor amount of the output or other utility of the property, plant, or equipment. [EITF 01-08, paragraph DISCUSSION, sequence 46] ] c. [Facts and circumstances indicate that it is remote that one or more parties other than the purchaser will take more than a minor amount of the output or other utility that will be produced or generated by the property, plant, or equipment during the term of the arrangement, and the price that the purchaser (lessee) will pay for the output is neither contractually fixed per unit of output nor equal to the current market price per unit of output as of the time of delivery of the output. [EITF 01-08, paragraph DISCUSSION, sequence 47] ] FASB ASC 13-3 Time Sharing Search time sharing and reversionary 978-40-25 25-1 Paragraph 840-10-25-1(a) requires that title must be transferred in order to recognize a sale of real estate. For purposes of recognizing profit on time-sharing transactions under Subtopic 360-20, it is necessary that such transfer be nonreversionary. A contract-for-deed arrangement meets this criterion. 25-2 If the title transfer is reversionary, the seller shall account for the transaction as if it were an operating lease. FASB ASC 13-4 Sale and Leasebacks in Regulated Industries Search Sal e and Leasebacks in Regulated Industries 25-1 Accounting for sale-leaseback transactions in accordance with the guidance in Subtopic 840-40 may result in a difference between the timing of income and expense recognition required by that Subtopic and the timing of income and expense recognition for rate-making purposes. 980-840-25-2 That difference shall be accounted for as follows: a. If the difference in timing of income and expense recognition constitutes all or a part of a phase- in plan, it shall be accounted for in accordance with Subtopic 980-340. b. Otherwise, the timing of income and expense recognition related to the sale-leaseback transaction shall be modified as necessary to conform to the Regulated Operations Topic. That modification required for a transaction that is accounted for by the deposit method or as a financing is further described in the following paragraph and paragraphs 980-840-35-1 through 35-2.
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