Bear

Published on June 2016 | Categories: Documents | Downloads: 69 | Comments: 0 | Views: 528
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ASC 840-10-25-5 For a lessee, minimum lease payments comprise the payments t hat the lessee is obligated to make or can be required to make in connection wit h the leased property, excluding both of the following: a. Contingent rentals b. Any guarantee by the lessee of the lessor's debt and the lessee's obligatio n to pay (apart from the rental payments) executory costs such as insurance, mai ntenance, and taxes in connection with the leased property.

The lease agreement includes a provision requiring a penalty payment if Big Bear¡¯s bank declares it in default under its primary credit arrangement. This potenti al cost should be included in calculating minimum lease payments since a lack of predetermined criteria exists to determine default. According to ASC 840-10-25-14 all the conditions have to exits in order for the penalty payment to be excluded from the minimum lease payment all of the followi ng have to be true. Not all of these are present. The ¡°Material adverse change¡± is not defined in the lease agreement there is no ¡°Predefined criteria¡± for a default. Therefore the penalty payments should be included in the minimum lease payment.

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