Describe some of the history of the issue-did the board

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Reference no: EM132671012

Assume a company pays $10,000 per month plus 2% of sales ("a variable rent charge") to occupy a retail space in a mall. The lease agreement has a 3-year noncancelable term. Based on prior history in that location, the company estimates that its variable rent charge will amount to approximately $1,000 per month.

Problem a. Using the Conceptual Framework, evaluate whether this variable rent change meets the definition of a liability.

Problem b. Next, locate discussion in the Basis for Conclusions of ASU 2016-02 (Leases) and describe how the FASB considered this issue of whether variable rents should be included in the lease liability recognized by companies. Describe some of the history of this issue-did the Board always hold the view that variable rents should/should not be included in companies' lease obligations?

Reference no: EM132671012

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