The follow
ing post has two assignments namely;
1.Obstacles that we face as a nation in establishing a “more perfect union.”
Identify 4 successes we have achieved and 4 obstacles that we face as a nation
in establish
ing a “more perfect union.”
2.You Tell Me, Am I a Lease?
Auto Inc. (Auto) is a company based
in New York that manufactures automobiles and
exports the f
inished vehicles to Europe. Auto manufactures two models; the most popular
model is a four-door sedan (Sedan), and the other is a less common, highly customizable
luxury sports car (Luxury Car). Auto contracts Trans-Atlantic Inc. (Atlantic) to ship its
products to Europe. Atlantic has a fleet of 10 multi-use shipp
ing vessels, each with
capacity for 2,000 vehicles.
The terms of the shipp
ing contracts are as follows:
x Sedan contract terms:
o The term is five years.
o MV Manhattan, a ship
in Atlantic’s fleet, is dedicated to shipp
ing Auto’s
Sedans for the term of the contract.
o Auto determ
ines (1) which European ports receive shipments and (2) the
order
in which deliveries are made to the ports; Auto
instructs Atlantic
accord
ingly.
o Auto has the option to send the ship below capacity. If the ship is below
capacity, Atlantic cannot use the excess capacity to ship products of its
other customers.
x Luxury Car contract terms:
o The term is five years.
o Atlantic is required to deliver shipments of Luxury Cars with
in five weeks
of notification from Auto that an order of Luxury Cars is ready for shipp
ing.
o Atlantic may choose any ship from its fleet to complete the request.
o Auto may provide 250 to 2,000 Luxury Cars
in a s
ingle request; however,
shipp
ing requests of Luxury Car generally do not exceed 500 vehicles
in a
s
ingle request because of the lower production volume and longer
manufactur
ing time of Luxury Car.
o Atlantic has the option to use excess capacity to ship products of its other
customers.
o After notification from Auto that Luxury Cars are ready to ship, Atlantic
determ
ines when with
in the five-week period to ship the cars, as well as the
shipp
ing route.
Auto’s CFO understands that the new leas
ing standard has certa
in provisions that may
affect how the company treats contracts of this nature.
Required:
Analyze the above and prepare a memorandum address
ing the impact (if any) of the new
leas
ing standard on Auto’s shipp
ing arrangements for the follow
ing considerations:
Case 17-1: You Tell Me: Am I a Lease? Page 2
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All Rights Reserved.
1. Determ
ine whether each of Auto’s contracts with Atlantic for Sedan and Luxury
Car conta
ins an identified asset.
2. Determ
ine whether each contract conveys the right to control the use of the
identified asset to the lessee.