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["All information is provided \"as is\" with no guarantee as to completeness, accuracy or appropriateness for your needs.  See Terms of Service."]

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["TO BE COMPLETED BY USER"]

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["SCOPE ASSESSMENT - ASC 842 (COMPANY) - LESSEE ONLY","RESPONSE (SELECT FROM DROPDOWN)","NEXT STEP (SELECT FROM DROPDOWN)"]
["CONTRACT ID OR DESCRIPTION","ENTER CONTRACT ID OR DESCRIPTION HERE"]
["Q1 Can you identify a specific (tangible) asset in the contract that COMPANY can use for a period of time?","Please select...","Please select..."]
["Comments"]
["GUIDANCE:"]
["An asset is something you can identify that is not a service, used for more than one period and has a future benefit to COMPANY. Some examples are: a piece of equipment, a car, access to a network server, a building.  Access to a service, rather than an asset, is the right to receive services from a provider for a period of time that does not give rights to any specific asset identifiable through the contract.  The provider may need to use its own assets to provide the service but the service recipient does not get any rights to any specific assets of the provider.  Only items of property, plant and equipment are included, not inventory or intangibles."]
["The asset to be used MUST be specifically identified either explicitly (e.g., by inventory code, model and location, serial number, legal description for land, etc.) or implicitly (COMPANY knows which specific asset will be used because it will be installed for the duration of the lease, is highly customized for or dedicated to COMPANY, is unique, or is the only asset of this type that the supplier has at contract inception).  If the supplier has multiple assets appropriate for the service and there is nothing that suggests that an asset is either explicitly or implicitly  identified, select \"No, supplier will use whatever assets are necessary to deliver under contract\".  "]
["An identified tangible asset must have a physical boundary (be \"physically distinct\").  COMPANY must be able to identify specifically which part of a tangible asset it is using (e.g.; a specific location on the server; a particular turbine, piece of equipment, or processing line at a plant; a specific physical location on land; a specific physical portion of a building or land (a single floor, a portion of a floor, or specific part of a yard).  A capacity portion (e.g., a % of network, server, or pipeline capacity) cannot be physically identified and therefore cannot be an identified asset, unless it represents substantially all (90% or more) the economic benefits of a physical asset.  In this question, \"asset\" means the entire asset, a physically distinct portion, or multiple assets representing a single lease (see guidance in Q2 below)."]
["Rights involving small physical components/portions of larger assets may be difficult to assess under this step (e.g., space on building walls, specific location in a building to house a customer-owned asset, etc.). One of the considerations is whether the asset is specifically commercially designed to include components that can be leased or used by others separately from the rest of the asset.  In many cases, the conclusion is clear and consistent with common sense and the nature of the business.  However, significant judgment may be required, in which cases consultation is best."]
["NOTE: Land easements and land contracts where land is not used exclusively for oil and gas exploration, development and production must be assessed under this step.  Land used exclusively for oil and gas exploration, development and production is not in scope of ASC 842."]
[]
["Q2 Is the asset or contract exempt from lease accounting and disclosure requirements?","Please select...","Please select..."]
["Comments"]
["GUIDANCE:"]
["If a combination of assets is considered as a single lease, references to \"asset\" above are to the entire combination (ie., the monthly payment for the entire combination is $2,000 or less).  "]
["The lease term will exceed one month or 12 months, respectively, if the lease contains a renewal option that is controlled by JACOS and is reasonably certain of being exercised (as assessed at the contract commencement date), extending the period of use to more than one or 12 months from the commencement date.  The option may be reasonably certain of being exercised for various reasons including:"]
["- there is a bargain renewal option such that the price in the option is sufficiently low that COMPANY will exercise it"]
["- there are significant leasehold improvements that will be lost if the lease is not extended (e.g., buildings built on leased land)"]
["- the costs of terminating or not extending the lease (e.g., returning assets, restoring assets, finding replacement assets, termination penalties, etc.) are sufficiently high that COMPANY will extend the lease"]
["- given the nature (e.g., specialized) and location (e.g., highly integrated with other assets that COMPANY owns) of the leased asset, there are no other suitable business alternatives other than extending the lease"]
[]
["Q3 Assessed at the inception of the contract, can the asset be practically substituted by the supplier throughout the period of use (when/if it is economical for them, not just when the asset does not work, a particular condition is met, etc.)?","Please select...","Please select..."]
["Comments"]
["GUIDANCE:"]
["Consider whether COMPANY can control whether or not it continues to use the actual specific asset for a certain period.  To answer \"No\", among other situations, the supplier cannot choose to provide another similar asset or require COMPANY to return the asset at the supplier's option.  To answer \"Yes\", the substitution right must be substantive.  This means that the supplier must have the practical ability to substitute another readily available asset, and such substitution should be economically beneficial to the supplier (the benefits exceed the all-in substitution-related (i.e., incremental) costs to the supplier).  If the customer cannot readily make this determination, it is presumed that the substitution right is not substantive. (ASC 842-10-15-15)"]
["An entity's evaluation of whether a supplier's substitution right is substantive is based on facts and circumstances at inception of the contract and shall exclude consideration of future events that, at inception of the contract, are not considered likely to occur. Examples of future events that, at inception of the contract, would not be considered likely to occur and, thus, should be excluded from the evaluation include:"]
["(a)     an agreement by a future customer to pay an above market rate for use of the asset;"]
["(b)     the introduction of new technology that is not substantially developed at inception of the contract;"]
["(c)     a substantial difference between the customer's use of the asset, or the performance of the asset, and the use or performance considered likely at inception of the contract; and"]
["(d)     a substantial difference between the market price of the asset during the period of use, and the market price considered likely at inception of the contract. (ASC 842-10-15-11)"]
["Substantive substitution rights is not an easy hurdle to meet.  If the asset is specifically identified in the contract, the very commercial reason for its identification may result in the conclusion that there are no substantive substitution rights.  If the asset is implicitly identified, substantive substitution rights are less likely to be present because of the unique nature of the asset and the likely lack of practical substitution options at the inception of the contract.  Conclusions should be consistent with the business purpose/rationale."]
["Substitution rights are more common where there are multiple similar assets the supplier owns and although the initial asset is specified, the supplier retains the right to substitute - this could exist with having access to multiple servers on a network, a truck in in a fleet of similar trucks, etc.  "]
[]
["Q4 Does COMPANY obtain substantially all the economic benefits from the asset for the period of use?","Please select...","Please select..."]
["Comments"]
["GUIDANCE:"]
["Economic benefits include the benefit of the primary outputs, by-products or any other tangible or intangible benefits that can be realized in commercial transactions through the use of the asset (except for tax benefits as those depend on the owner rather than the asset itself).  Economic benefits in ASC 842 is a broad concept and therefore it requires a careful assessment of all the benefits that may be obtained through the use of the asset, which may not have previously been considered (e.g., the use of a building for advertising, etc.).  However, if the contract does not allow anyone else to have access to benefits beyond those explicitly permitted by the contract, those other benefits do not need to be considered."]
["The \"rule of thumb\" for \"substantially all\" is generally 90% although it is not a bright line.  In some cases, a quantitative assessment may be necessary.  "]
["This assessment extends only to the period of use under the contract (so the company does not need to obtain substantially all the economic benefits for the entire economic life of the asset).  "]
["To obtain the economic benefits COMPANY does not necessarily have to be the ultimate consumer if, for example, it subleases the asset or transfers the benefits to a third party in a commercial transaction that benefits COMPANY.  It is key, however, that the benefits be considered in light of COMPANY's rights under the contract.  For example, if under the contract with the supplier during the term of use, COMPANY does not obtain the rights to a significant by-product of the asset or other benefits that can reasonably be commercially generated from using the asset (and another entity can obtain those other benefits), it may not obtain substantially all the benefits of the asset.  On the other hand, the asset owner may retain certain \"protective\" rights to protect its continuing investment in the asset, which may limit access to some benefits or decision-making rights (e.g., a prohibition against using the asset in certain locations, etc.)  Such protective rights would not impact this assessment."]
[]
["Q5 Does COMPANY have the right to direct how and for what purpose the asset can be used?","Please select...","Please select..."]
["Comments"]
["GUIDANCE:"]
["To have a lease, COMPANY  must to control the right to use the leased asset.  This is not the same as controlling the leased asset itself.  If you control a tangible asset you would usually be able to sell it, use it as security, change its functionality, or destroy it if you so choose.   If you control the right to use the asset, the only thing you control is how and for what purpose the asset is actually used WITHOUT being able to change its purpose or design – you control nothing else if you lease.  The key concept here is that you must understand what the asset is actually designed to do to make money, which decisions about using the asset are most important to economic returns, and then who can make those most important decisions over the period of use."]
["Sometimes assets are used by suppliers to perform contracts for customers, for example certain snow removal equipment may be identified in a contract, but the supplier decides when and how to deploy it to fulfill the contract requirements.  Customers may just be contracting for the output or the deliverable from the asset use, but how the asset is used is controlled by the supplier.  In this case, the customer has no \"right-to-use\" asset to account for.  In other cases, through decisions of when/whether to operate an asset or not (e.g., processing decisions at gas straddle plants, deployment decisions for a drilling rig), the customer makes decisions about the most significant money-making activities of the asset.  "]
["This assessment can be highly judgmental and facts/circumstances dependent.  Note that these are generally not the decisions made during operating/maintaining the asset.  Some examples of relevant decisions, depending on circumstances, are:"]
["1. rights to change the type of output that is produced by the asset (for example, to decide whether to use a shipping container to transport goods or for storage, or to decide upon the mix of products sold from retail space);"]
["2. rights to change when the output is produced (for example, to decide when an item of machinery or a power plant will be used);"]
["3. rights to change where the output is produced (for example, to decide upon the destination of a truck or a ship, or to decide where an item of equipment is used); and"]
["4. rights to change whether the output is produced, and the quantity of that output (for example, to decide whether to produce energy from a power plant and how much energy to produce from that power plant)."]
["Some define the relevant decision-making rights in terms of \"w\" words: what is produced, where the asset can be used, when the asset can be used, whether the asset is used."]
["These rights are not necessarily correlated with the physical location of the asset, or are expected to be held by the party that has the day-to-day physical access to the asset.  It is not always necessary to control all of the decisions related to use.  For example, a building may be made for office space so the user cannot make decisions about the overall purpose – that is pre-determined.  However, it can make decisions about HOW to use that office space - when it is used and when it is not used for example.  So in this case there are substantive decisions being made and to the extent these decisions are controlled by the user – this criterion is met.  "]
["As with economic benefits, some decisions may be restricted by the supplier to protect an asset they own (\"protective\" rights) rather than to derive economic benefits from use.  These rights do not impact this assessment."]
["Sometimes all the decisions about how and for what purpose the asset can be used are predetermined by contract or by design - therefore, nobody can make any substantive decisions about this for the duration of the contract or for the life of the asset.  These situations do occur but they exist only when NO significant decisions about this can be made by anyone.  An example is a wind farm, which by design cannot be dispatched and operates when the wind blows, or a crane that is installed to construct a particular building and must operate whenever there is a requirement to use it for this purpose, or a fence installed at a construction site and cannot be moved to another location.  "]
["Complexity can arise if assets are part of a bigger connected system or infrastructure network, as the customer may have difficulty directing the use of a single component of a highly integrated system.  For example, if you are using a number of servers on a network and can control the overall use but cannot make decisions about the use of the individual servers, then you do not have the right to direct the use of the identified assets.  If you are using an exclusive-use asset connected  to bigger network (e.g., phone cables connecting to your building or lateral pipelines), it is important to assess whether the asset can function/operate independently from the bigger system, and if so, who makes the decision whether or not it functions.  This assessment is very dependent on the facts around how things actually work. "]
[]
["Q6 Did COMPANY design the asset or does it have the right to operate it (or direct others to operate)?","Please select...","Please select..."]
["Comments"]
["GUIDANCE:"]
["This assessment can be highly judgmental."]
["The evaluation of who designed exclusive-use plants and customized equipment can be complex.  However, it is straightforward for standard equipment or assets that were designed without any involvement from COMPANY."]
["If COMPANY can kick-out the operator at will (without cause at any time), then COMPANY has the right to direct others to operate the asset.  However, if the owner of the asset has the right to operate it and COMPANY cannot impact this decision, then COMPANY does not control the right to use for assets where use is predetermined."]
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[null,null,"CLICKING HERE WILL RESET WORKSHEET"]

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["Question 1"]
["Yes_explicit",null,"Proceed to next question"]
["Yes_implicit",null,"Proceed to next question"]
["No_supplier_will_use_whatever_assets_are_necessary_to_deliver_under_contract_see_guidance",null,"Stop - no further action required"]
[]
["Question 2"]
["Yes_contract_term_does_not_exceed_one_month_see_guidance",null,"Stop - no further action required"]
["Yes_term_exceeds_12_months_AND_monthly_payment_does_not_exceed_2000",null,"Proceed to next question; if a lease is identified, then expenditures for this contract should be booked to account XXXX (LONG-TERM LOW-VALUE ASSETS); no special accounting is required.   "]
["Yes_term_exceeds_one_month_and_does_not_exceed_12_months_see_guidance ",null,"Proceed to next question; if a lease is identified, then expenditures for this contract should be booked to account YYYY (SHORT-TERM LEASES OF ANY VALUE); no special accounting is required.  "]
["No_exemptions_apply",null,"Proceed to next question, if a lease is identified, then special accounting is required for this contract. EXPENDITURES FOR CONTRACTS WHERE A LEASE IS IDENTIFIED SHOULD BE RECORDED TO ACCOUNT ZZZZ (LEASES REQUIRING RECOGNITION)."]
[]
["Question 3"]
["Yes_supplier_can_substitute",null,"Stop - no further action required"]
["No_supplier_cannot_substitute",null,"Proceed to next question"]
["I_do_not_have_enough_information_to_answer ",null,"Proceed to next question"]
[]
["Question 4"]
["Yes_COMPANY_obtains_substantially_all_benefits",null,"Proceed to next question"]
["No_COMPANY_does_not_obtain_substantially_all_benefits",null,"Stop - no further action required"]
["There_are_possible_significant_intangible_benefits_from_use_that_I_may_not_know_of",null,"Research or consult"]
["I_think_quantitative_assessment_is_needed_to_conclude",null,"Research or consult"]
["Rights_to_obtain_economic_benefits_differ_in_different_periods_which_may_impact_the_overall_conclusion",null,"Research or consult"]
["I_do_not_know_if_supplier_rights_restricting_benefits_are_only_protective",null,"Research or consult"]
[]
["Question 5"]
["Yes_COMPANY_directs_how_and_for_what_purpose_the_asset_can_be_used_throughout_period_of_use",null,"STOP - THERE IS A LEASE"]
["No_asset_use_is_predetermined_see_guidance",null,"Proceed to next question"]
["No_COMPANY_cannot_make_decisions_about_asset_use_another_unrelated_party_makes_these_decisions",null,"Stop - no further action required"]
[]
["Question 6"]
["Yes_COMPANY_either_designed_or_has_right_to_operate",null,"STOP - THERE IS A LEASE"]
["No_COMPANY_neither_designed_not_has_right_to_operate",null,"Stop - no further action required"]