Bondholders are further insulated by protective features such as subordination of transfer payments, contingent rent
provisions, healthy cash-funded reserves, and continued remittal of CFCs to the trustee in the event of project lease termination.
A 2005 letter from the SEC Chief Accountant emphasizes that contingent rent
amounts should be disclosed and that the basis for these rents should be disclosed with "specificity, not generality" (http://bit.ly/2iBggZk).
If the increase or decrease in rent is wholly attributable to a contingent rent
provision, or a single rent holiday for a period of three months or less at the beginning of the lease term, or the duration of the rent holiday is reasonable and does not exceed the lesser of 24 months or 10% of the lease term.
These lease agreements included base rent of USD 500 per acre and contingent rent
of 50% of the operating profit of the leased property as defined in the lease agreements.
(3) any contingent rent
that accrues during the taxable year.
While there is a general agreement among those surveyed that the renewal options and contingent rents
should be included in the measurement, there are concerns about the subjectivity surrounding the estimation of renewal probability, renewal rent and contingent rent
, as well as the administrative burden of the required reassessment of those estimates every reporting period.
Under the current standard, contingent rent
payments are recognized as rent expense when incurred.
In addition, the company said landlords agreed to settle $29 million in contingent rent
obligations on a number of Bailey Bank & Biddle stores.
If a loss is incurred on the sale, in most cases the tenant would reimburse the SPE for the entire loss, using a contingent rent
payment (a residual value guaranty).
A rental agreement qualifies for the less-than-$250,000 de minimis exception if, as of the agreement date,(8) it is reasonably expected that the sum of the aggregate rental payments under the lease and the aggregate value of all other consideration to be received for the use of property (including contingent rent
) will not exceed $250,000.(9) For purposes of this rule, all rental agreements that are part of the same transaction or a series of related transactions involving the same lessee (or any related person) and the same lessor (or any related person) are treated as a single rental agreement.(10)
The CONRAC also benefits from strong features such as contingent rent
provisions and continued remittal of CFCs to the trustee in the event of project lease termination.