Case 06-12

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00-6 Who's Paying the Rent? .Attached Files: 00-06c_whos_paying_the_rent lease.pdf (34.721 KB) .

Case Objective
Evaluating the various accounting alternatives that retailers are confronted with when they receive lease incentives from a lessor.

Applicable Professional Pronouncements
ASC 845:

APB Opinion No. 29, Accounting for Nonmonetary Transactions (Opinion 29)

ASC 840:

FASB Statement No. 13, Accounting for Leases (Statement 13)
FASB Technical Bulletin No. 88-1, Issues Relating to Accounting for Leases (Technical Bulletin 88-1)

09-2 Pharmagen . Answer the questions that are given below, not as given in the case text.

Applicable Professional Pronouncements

•ASC 470-10-25-1 through 25-2, Debt: Overall: Recognition (EITF Issue No. 88-18,“Sales of Future Revenues” (Issue 88-18)) •ASC 730-20, Research and Development: Research and Development Arrangements(FASB Statement No. 68, Research and Development Arrangements (Statement 68) Required

1. Applicable GAAP

a. Explain how the arrangement can be said to provide funding for a product in the R&D phase (the “non-commercialized product”) and should be accounted for under ASC730-20 (Statement 68). [Do not be concerned here with how it should be accounted for. That is for question 2]

b. Explain how the arrangement can be said to provide funding in return for an interest in the future revenues of a product(s) and should be accounted for in accordance with ASC 470-10-25-1 through 25-2 (Issue 88-18).

2. Accounting for the arrangement

a. Support the argument that the proceeds from the arrangement should be recorded as debt under ASC 730-20.

b. Support the argument that the arrangement constitutes an obligation to perform contractual services; that is, the arrangement is a contract to perform R&D for others (i.e., a service contract).

Based on this fact pattern I would argue that treatment related to ASC 730-20 is applicable. With regard to this accounting standard...
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