Assume Keller Co. pays 10% of sales to occupy a retail space in a mall. The lease agreement has three-year noncancelable term. Based on prior history in that location, the company estimates that its percentage of rent charge will amount to approximately $1,500 per month.

1. Evaluate how the Codification addresses this rental charge and whether Keller Co. should include the percentage rent charge in measuring its lease liability?
2. Consider accounting firm guidance-what additional interpretation / examples can you find that address this issue?
3. Using the Conceptual Framework, evaluate whether this percentage rental change meets the definition of a liability ?
4. Finally, locate the Accounting State Update (ASU) that gave rise to this requirement in ASC 842, and go to its Basis for Conclusions. Describe how the FASB considered this issue of whether rental fees such as this should be included in the lease liability recognized by companies. Describe some of the history of this issue-did the Board always hold this view that this type of rental change should/should not be included in companies' lease obligations?