FASB, Financial Accounting Standards Board.

Determining Contingent Rentals—an amendment of FASB Statement No. 13 (Issued 6/79)

Summary

The Board has been asked to reconsider the definition of contingent rentals in FASB Statement No. 13, "Accounting for Leases," because differing views about the meaning of that definition result in similar leases being accounted for differently, for example, as a capital lease by one lessee and as an operating lease by another lessee. This Statement defines contingent rentals as the increases or decreases in lease payments that result from changes occurring subsequent to the inception of the lease in the factors on which lease payments are based. Lease payments that depend on a factor that exists and is measurable at the inception of the lease, such as the prime interest rate, would be included in minimum lease payments based on the factor at the inception of the lease. Lease payments that depend on a factor that does not exist or is not measurable at the inception of the lease, such as future sales volume, would be contingent rentals in their entirety and, accordingly, would be excluded from minimum lease payments and included in the determination of income as they accrue.