Lease – Rail cars

The case:

A contract between Customer and a freight carrier (Supplier) provides Customer with the use of 10 rail cars of a particular type for five years. The contract specifies the rail cars; the cars are owned by Supplier. Customer determines when, where and which goods are to be transported using the cars. When the cars are not in use, they are kept at Customer’s premises. Customer can use the cars for another purpose (for example, storage) if it so

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Right to control the use of the identified asset

A contract conveys the right to control the use of an identified asset for a period of time if, throughout the period of use, the customer has the right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset.

Right to obtain substantially all of the economic benefits from use of the identified asset

Short-term lease – Truck rental

The Case:

Customer enters into a contract with Supplier for the use of a truck for one week to transport cargo from New York to San Francisco. Supplier does not have substitution rights. Only cargo specified in the contract is permitted to be transported on this truck for the period of the contract. The contract specifies a Truckmaximum distance that the truck can be driven. Customer is able to choose the details of the journey (speed, route, rest stops, etc.)

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Does the contract contain a lease 4

Does the customer have the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions?

Consideration: The customer has the right to operate the asset (or to direct others to operate the asset in a manner that it determines) throughout the period of use, without the supplier having the right to change those operating instructions.

Yes   /   No

This is part of the  walk through decision model
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