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62. Amend paragraphs 840-10-35-5 and 840-10-35-9 and their related heading, with no change to transition, as follows:

  • >

    > Lease of an AcquireeEntity Acquired in a Business Combination

840-10-35-5 The classification of a lease in accordance with the criteria in this Subtopic shall not be changed as a result of a business combination or an acquisition by a not-for-profit entity [FIN 21, paragraph 16, sequence 39.1.1.1] unless the provisions of the lease are modified. At the acquisition date, an acquirer may contemplate renegotiating and modifying leases of the business or nonprofit activity acquired. Modifications made after the acquisition date, including those that were planned at the time of the business combination, are postcombination events that shall be accounted for separately by the acquirer in accordance with the provisions of this Topic. If in connection with a business combination or an acquisition by a not-for-profit entity [FIN 21, paragraph 16, sequence 39.1.1.1] the provisions of a lease are modified in a way that would require the revised agreement to be considered a new agreement under the preceding paragraph, the new lease shall be classified by the combined entity according to the criteria set forth in this Subtopic, based on conditions as of the date of the modification of the lease. After the recording of the amounts called for by Subtopic 805-20, the leases shall be accounted for in accordance with this

Subtopic. Subtopic

application

of

this

840-30

paragraph

(see

paragraph

840 30 25 10)

to

a

leveraged

lease

by

an

entity

explains the that acquires a

lessor. This Subtopic does not address the subsequent recorded for favorable or unfavorable operating leases.

accounting

for

amounts

840-10-35-9 Paragraph 805-20-35-6 requires that leasehold improvements acquired in a business combination or an acquisition by a not-for-profit entity be amortized over the shorter of the useful life of the assets or a term that includes required lease periods and renewals that are deemed to be reasonably assured (as used in the definition of lease term) at the date of acquisition.

63.

Amend paragraph 840-30-25-10 and its

related

heading,

with

a

link

to

transition paragraph 958-805-65-1, as follows:

  • >

    > Leveraged Lease Acquired in a Business Combination or an

Acquisition by a Not-for-Profit Entity

840-30-25-10 In a business combination or an acquisition by a not-for-profit entity, the acquiring entity shall retain the classification of the acquired entity’s investment as a lessor in a leveraged lease at the date of the combination. The net investment of the acquired leveraged lease shall be broken down into its component parts, namely, net rentals receivable, estimated residual value, and unearned income including discount to adjust other components to present value.

97

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