Case 2: This case is adapted from a case from Deloitte Development LLC, copyright 2017.

Auto Inc. (Auto) is a company based in New York that manufactures automobiles and exports the finished vehicles to Europe. Auto manufactures a four-door sedan (Sedan). Auto contracts Trans-Atlantic Inc. (Atlantic) to ship its products to Europe. Atlantic has a fleet of 10 multi-use shipping vessels, each with capacity for 2,000 vehicles.

The terms of the shipping contracts are as follows:

• The term is five years.
• MV Manhattan, a ship in Atlantics fleet, is dedicated to shipping Autos Sedans for the term of the contract.
• Auto determines (1) which European ports receive shipments and (2) the order in which deliveries are made to the ports; Auto instructs Atlantic accordingly.
• 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.
• The contract contains an identified asset, a term is defined in Accounting Standards Codification (ASC) 842-10-15-1.

Required: Determine whether the contract conveys the right to control the use of the identified asset to the lessee.

Use only ASC 842-10-15. Use the pending guidance where appropriate.

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