SEC comment letter. In the comment letter, the SEC asked the company to clarify its application of AsC &4 Locate this comment letter (see comment #2, Rent Expense), and describe: 840-20 What is the SEC's concern? . What is the company's response? Carefully read, then summarize the company's position and rationale. What information can you gather from this correspondence that may go above and beyond the compan . nual filing disclosure? Finally, notice how readily the company was able to refer to SEC staff guidance that supported their accounting Dos tion. It's like they already had a thoughtful accounting memo on hand, ready to go! Lease Classification, Considering Firm Guidance (Issues Memo) Facts: Tech Startup Inc. ("Lessee") is entering into a contract with Developer Inc. ("Landlord") to rent Landlordt newly constructed office building located at 15 Tech Drive in San Francisco, CA. The lease term is 10 years, and the estimated life of the building is 40 years. Lessee will occupy all 12 floors of the building. At the end of the lease term, Lessee has the option to purchase the property for $16.25 million. The fair value of the building at that time is expected to be $17 million. 5.7 Monthly, Lessee will be required to pay $50,000 to occupy the building, plus a monthly supplemental remtal cost based on Lessee's sales (1% of sales). From experience, Lessee estimates that 1% of its sales should approxi. mate an additional $20,000 per month. For simplicity, please ignore discounting (use of present value calculations rates implicit in the lease, etc.) for purposes of this example. There are no residual value guarantees present in this example. Required: You are a corporate accountant for Lessee and have been asked to prepare an accounting issues memo address the following issue: Should the lease arrangement be classified as an operating lease or as a capital lease Assume that this arrangement is within the scope of lease accounting guidance. As needed to clarify areas ing guide book. Case Studies Involving Energy Works (5.8-5.10) judgment, support your response with guidance from both the Codification and from EY's most recent Lease account Understanding Joint Ventures, using Nonauthoritative Guidance The term joint ventures has a very spec finition and application in U.S. GAAP, as you saw illustrated in the previous chapter's Energy Works example 5.8 ific First, locate Codification guidance defining a corporate joint venture, and explain the requirements to meet this definition. l. an