Chapter 13 - Solution Manual

Paragraph discussion sequence 2921 see related

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requirement that the lessee make a payment to the lessor. [EITF 97-01, paragraph DISCUSSION, sequence 29.2.1] ]See related guidance beginning in paragraph 840-10-25-13. Maintenance Deposits 840-10-05-9A [Under certain equipment lease agreements, a lessee is legally or contractually responsible for repair and maintenance of the leased asset throughout the lease term. Additionally, certain lease agreements include provisions requiring the lessee to make deposits to the lessor to financially protect the lessor in the event the lessee does not properly maintain the leased asset. [EITF 08–03, paragraph 2, sequence 2.1] ][ Lease agreements often refer to these deposits as maintenance reserves or supplemental rent. However, the lessor is required to reimburse the deposits to the lessee upon the completion of maintenance activities that the lessee is contractually required to perform under the lease agreement. [EITF 08–03, paragraph 2, sequence 2.2] ] 840-10-05-9B [Under a typical arrangement, maintenance deposits are calculated based on a performance measure, such as hours of use of the leased asset, and are contractually required under the terms of the lease agreement to be used to reimburse the lessee for required maintenance of the leased asset upon the completion of that maintenance. The lessor is contractually required to reimburse the lessee for the maintenance costs paid by the lessee, to the extent of the amounts on deposit. [EITF 08– 03, paragraph 3, sequence 3] ] 840-10-05-9C [In some cases, the total cost of cumulative maintenance events over the term of the lease is less than the cumulative deposits, resulting in excess amounts on deposit at the expiration of the lease. In those cases, some lease agreements provide that the lessor is entitled to retain such excess amounts; whereas other agreements specifically provide that, at the expiration of the lease agreement, such excess amounts are returned to the lessee (refundable maintenance deposit). [EITF 08–03, paragraph 4, sequence 4.1] ] Paragraph 840-10-25-39A provides related guidance. Arrangements that Qualify as Leases 840-10-15-6 [An arrangement conveys the right to use property, plant, or equipment if the arrangement conveys to the purchaser (lessee) the right to control the use of the underlying property, plant, or equipment. [EITF 01-08, paragraph DISCUSSION, sequence 43.1] ][ The right to control the use of the underlying property, plant, or equipment is conveyed if any of the following conditions is met: [EITF 01-08, paragraph DISCUSSION, sequence 43.2] ] a. [The purchaser has the ability or right to operate the property, plant, or equipment or direct others to operate the property, plant, or equipment in a manner it determines 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 44] ][ The purchaser's ability to operate the property, plant, or equipment may be evidenced by (but is not limited to) the purchaser's ability to hire, fire, or replace the property's operator or the purchaser's ability to
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