Shuttered Inc. $($s$)$ operates various types of retail stores across the United States, including grocery stores, pharmacies, electronics stores, and gaming equipment stores. While most of the stores are in stand$-$alone buildings, some are located in large shopping centers. All retail space is leased from public and private real state companies $($i$.$e$.,$ S is a lessee$).$

In early $20$x$2,$ an economic downturn began to negatively affect almost every industry, directly or indirectly, in the United States. As a result, S was forced to temporarily close some of its stores that experienced a sharp decrease in demand $($e$.$g$.,$ electronics and gaming equipment stores$).$ S$$s other stores $($e$.$g$.,$ grocery stores and pharmacies $)$ remained open but were adversely affected because of decreased customer foot traffic and declining demand in certain non$-$essential product categories.

To manage mounting costs and negative cash flows, S requested and received the following rent concessions from its landlords in Jun $20$x$2$:

$$ Electronics stores $$ Abatement of three months$$ rent for the period beginning July $1,20$x$2.$

$$ Gaming equipment stores $$ Deferral of three months$$ rent for the period beginning July $1,20$x$2,$ to be repaid in equal installments over the last six months of calendar year.

$$ Grocery stores $$ Abatement of three months$$ rent for the period beginning July $1,20$x$2,$ along with an extension of the lease term by $12$ months. The rent to be paid over the extended term will remain $$10,000$ per month.

$$ Pharmacies $$ No concessions.

Key Facts and Assumptions

$$ S has adopted ASC $482,$ Leases, before $20$x$2.$

$$ All of S$$s leases are accounted for as operating leases both before and after the concessions.

$$ All of the leases began on January $1,20$x$2,$ and required monthly lease payments of $$10,000,$ through December $31,20$x$4.$

$$ The rate implicit in these leases is not readily determinable for S; accordingly, it used its own incremental borrowing rate $(8$ percent$)$ as the discount rate for these leases at lease commencement.

$$ The right$-$of$-$ use $($ROU$)$ asset and lease liability balances on July $1,20$x$2,$ for each group of leases are as follows $($refer to amortization schedule for more details$)$:

o Lease liability $($$$271,088).$

o ROU asset $-$ $$271,008.$

o S$$s incremental borrowing rate relevant to these leases upon the concessions in June $20$x$2$ was $10$ percent.

$$ There are no rent escalations under any of the lease contracts.

$$ None of the leases have an existing clause related to rent concessions in the event of an economic downturn or similar circumstances.

$$ There were no prior rent concessions with respect to any of the leases subject to the concessions described above.

$$ No other terms or conditions in the original lease agreements were modified along with the rent concessions.

Required:

$1.$ How should S account for each of the rent concessions?

Reference:

Original amortization schedule for all leases. Handout $1.$