Gauntlet Gyms Inc. owns athletic training facilities and camping grounds, which it leases to corporate clients, educational institutions, and other non-governmental organizations. The Xavier Institute agrees to lease one of these athletic training facilities on the following terms:

• The training facility comprises 7200 acres in Idaho. The lessor owns only one training facility in this location.
• The Xavier Institute can use the training facility at its discretion over the lease term. Gauntlet Gyms Inc. is prohibited from selling the facility during the lease term or terminating the lease agreement early.
• The lease term is for 30 years with an option to renew for an additional 20 years. The Xavier Institute is reasonably likely to renew. The useful life of this facility is 50 years.
• The lease contract requires Gauntlet Gyms Inc. to upgrade the facility to comply with the American Disabilities Act. Subsequent lessees of the facility can benefit from these upgrades.
• The lessee does not automatically obtain ownership of the facility at the end of the lease term and the lessee is not given an option to purchase the facility at the end of the lease term.
• Gauntlet Gyms Inc. will provide food catering services for four meals per day.
• The present value of the sum of the lease payments is $12 million. The facility’s fair market value is $13 million. The Xavier Institute is responsible for repairing all damage to the facility or paying 150% of the cost of any repairs.

Which provision of the lease contract is a non-lease component?

The lease contract requires Gauntlet Gyms Inc. to upgrade the facility to comply with the American Disabilities Act. Subsequent lessees of the facility can benefit from these upgrades.

Gauntlet Gyms Inc. will provide food catering services for four meals per day.

The Xavier Institute can use the training facility at its discretion over the lease term. Gauntlet Gyms Inc. is prohibited from selling the facility during the lease term or terminating the lease agreement early.

The training facility comprises 7200 acres in Idaho. Gauntlet Gyms Inc. owns only one training facility is this location.

Answer rating: 100% (QA)

As per the IND AS 116 in order to ascertain that whether the customer that is lessee has the control ... View the full answer