Chapter 17 — Sales of Nonfinancial Assets Within the Scope of ASC 610-20

17.4 Gain or Loss Recognition for Nonfinancial Assets

ASC 610-20 applies many of the same principles as ASC 606 for determining the gain or loss to recognize when a nonfinancial asset or in-substance nonfinancial asset is derecognized. Specifically, ASC 610-20 incorporates the requirements for determining:

When a contract exists (i.e., step 1).
Which nonfinancial assets or in-substance nonfinancial assets are distinct (i.e., step 2).
The amount of consideration to be included in the determination of the gain or loss recognized, including an estimate of variable consideration and the application of the “constraint” (i.e., step 3).
How to allocate the amount of consideration determined in step 3 to each distinct nonfinancial asset or in-substance nonfinancial asset (i.e., step 4).
When control of any nonfinancial asset or in-substance nonfinancial asset is transferred and results in the recognition of a gain or loss (i.e., step 5).

In a manner similar to the accounting for a contract with a customer, an entity would apply the guidance in ASC 606-10-25-6 through 25-8 if an arrangement fails to meet the criteria in ASC 606-10-25-1 for determining the existence of a contract (see Sections 4.5 and 4.6). In this situation, the nonfinancial asset would be (1) recognized in the statement of financial position, (2) amortized through its useful life (except for indefinite-lived intangible assets and property, plant, and equipment classified as held for sale), and (3) assessed for impairment.

Substantially all sales of nonfinancial assets and in-substance nonfinancial assets (that are not contracts with customers) will be recorded at a point in time.2 If control is transferred at a point in time, a gain or loss is recognized when the good or service is transferred to the customer. (See Section 8.6 for a discussion of the requirements for recognizing revenue at a point in time.) Under the revenue standard, entities determine whether they can derecognize nonfinancial assets such as real estate by using a control-based model. However, the FASB decided to include in ASC 606-10-25-30 “significant risks and rewards” as a factor for entities to consider in evaluating the point in time at which control of a good or service is transferred to a customer. Accordingly, although a seller of a nonfinancial asset such as real estate would evaluate legal title and physical possession to determine whether control has been transferred, it should also consider its exposure to the risks and rewards of ownership of the property as part of its “control” analysis under ASU 2014-09.

Connecting the Dots

Real estate sales in most jurisdictions (including the United States) will typically not meet the criteria to be recognized over time because it is uncommon for the seller to either (1) have an enforceable right to payment for its cost plus a reasonable margin if the contract were to be canceled at any point during the construction period or (2) be legally restricted from transferring the asset to another customer even if the contract were canceled at any point during the construction period. The revenue standard contains an example (see Section 8.4.5.2) in which a real estate developer enters into a contract to sell a specified condominium unit in a multifamily residential complex once construction is complete.

17.4.1 Derecognition of Nonfinancial Assets or In-Substance Nonfinancial Assets

ASC 610-20

25-1 To recognize a gain or loss from the transfer of nonfinancial assets or in substance nonfinancial assets within the scope of this Subtopic, an entity shall apply the guidance in Topic 810 on consolidation and in Topic 606 on revenue from contracts with customers as described in paragraphs 610-20-25-2 through 25-7.

Determining Whether an Entity Has a Controlling Financial Interest

25-2 An entity shall first evaluate whether it has (or continues to have) a controlling financial interest in the legal entity that holds the nonfinancial assets and/or in substance nonfinancial assets by applying the guidance in Topic 810 on consolidation. For example, if a parent transfers ownership interests in a consolidated subsidiary, the parent shall evaluate whether it continues to have a controlling financial interest in that subsidiary. Similarly, when an entity transfers assets directly to a counterparty (or a legal entity formed by the counterparty), the entity shall evaluate whether it has a controlling financial interest in the counterparty (or the legal entity formed by the counterparty).

25-3 If an entity determines it has (or continues to have) a controlling financial interest in the legal entity that holds the nonfinancial assets or in substance nonfinancial assets, it shall not derecognize those assets and shall apply the guidance in paragraphs 810-10-45-21A through 45-24.

25-4 Any nonfinancial assets or in substance nonfinancial assets transferred that are held in a legal entity in which the entity does not have (or ceases to have) a controlling financial interest shall be further evaluated in accordance with the guidance in paragraphs 610-20-25-5 through 25-7.

Applying Revenue Recognition Guidance

25-5 After applying the guidance in paragraphs 610-20-25-2 through 25-4, an entity shall next evaluate a contract in accordance with the guidance in paragraphs 606-10-25-1 through 25-8. If a contract does not meet all of the criteria in paragraph 606-10-25-1, an entity shall not derecognize the nonfinancial assets or in substance nonfinancial assets transferred, and it shall apply the guidance in paragraph 350-10-40-3 to any intangible assets and the guidance in paragraph 360-10-40-3C to any property, plant, and equipment. An entity shall follow the guidance in paragraphs 606-10-25-6 through 25-8 to determine if and when a contract subsequently meets all of the criteria in paragraph 606-10-25-1.

25-6 Once a contract meets all of the criteria in paragraph 606-10-25-1, an entity shall identify each distinct nonfinancial asset and distinct in substance nonfinancial asset promised to a counterparty in accordance with the guidance in paragraphs 606-10-25-19 through 25-22. An entity shall derecognize each distinct asset when it transfers control of the asset in accordance with paragraph 606-10-25-30. In some cases, control of each asset may transfer at the same time such that an entity may not need to separate and allocate consideration to each distinct nonfinancial asset and in substance nonfinancial asset. That may be the case, for example, when a parent transfers ownership interests in a consolidated subsidiary that holds nonfinancial assets (or nonfinancial assets and in substance nonfinancial assets) and ceases to have a controlling financial interest in the subsidiary in accordance with Topic 810. However, control of each asset may not transfer at the same time if the parent has control of some of the assets in accordance with paragraph 606-10-25-30 (for example, through repurchase agreements).

25-7 For purposes of evaluating the indicators of the transfer of control in paragraph 606-10-25-30, if an entity has (or continues to have) a noncontrolling interest in the legal entity that holds the nonfinancial assets or in substance nonfinancial assets as a result of the transaction, the entity shall evaluate the point in time at which the legal entity holding the assets obtains (or has) control (for example, by evaluating whether the legal entity can direct the use of, and obtain substantially all of the benefits from, each distinct nonfinancial asset or in substance nonfinancial asset within it). (See Case A of Example 2 in paragraphs 610-20-55-11 through 55-14.) If the entity does not have a noncontrolling interest in the legal entity that holds the nonfinancial assets or in substance nonfinancial assets as a result of the transaction, it shall evaluate the point in time at which a counterparty (or counterparties, collectively) obtains control of the assets in the legal entity (for example, by evaluating whether a counterparty [or counterparties, collectively] can direct the use of, and obtain substantially all of the benefits from, each distinct nonfinancial asset or in substance nonfinancial asset within the legal entity).

To determine when to derecognize a nonfinancial asset or in-substance nonfinancial asset, an entity should first assess whether it has lost a controlling financial interest in the subsidiary (i.e., the legal entity that holds the asset). If the entity obtains a controlling financial interest in a new subsidiary that holds the nonfinancial asset after the transaction, or if the entity retains a controlling financial interest in an existing subsidiary that holds the asset (e.g., because the entity sold a noncontrolling ownership interest in a consolidated subsidiary), the entity should not derecognize the nonfinancial asset or in-substance nonfinancial asset. Instead, the entity should account for the transaction as an equity transaction in accordance with ASC 810.

However, if the entity has not obtained or retained a controlling financial interest in such legal entity that holds the asset, it should derecognize the nonfinancial asset or in-substance nonfinancial asset when it transfers control of the asset in a manner consistent with the principles in ASC 606 (see Chapter 8). That is, when evaluating whether or in what circumstances it is appropriate to derecognize the nonfinancial asset or in-substance nonfinancial asset, the entity should first evaluate whether it has lost a controlling financial interest in the legal entity by applying the guidance in ASC 810. If the entity determines that it has lost a controlling financial interest in the legal entity under ASC 810, it should then evaluate whether it has lost control of the nonfinancial asset or in-substance nonfinancial asset by applying the guidance in ASC 606. When evaluating whether control of the asset has been transferred under ASC 606, the entity has to consider any repurchase agreements (e.g., a call option to repurchase the ownership interest in the legal entity) and may not be able to derecognize the nonfinancial asset, even though it no longer has a controlling financial interest in a subsidiary in accordance with ASC 810. Cases A and B of Example 2 in ASC 610-20, which are reproduced below, illustrate the application of this guidance.

ASC 610-20

Example 2 — Transfer of Control

Case A — Control Transfers Under Topics 810 and 606

55-11 Entity A owns 100 percent of Entity B, a consolidated subsidiary. Entity B holds title to land with a carrying amount of $5 million. Entity A concludes that the land is not an output of its ordinary activities within the scope of Topic 606 and that Entity B does not meet the definition of a business within the scope of Topic 810.

55-12 Entity A enters into a contract to transfer 60 percent of Entity B to Entity X for $6 million cash due at contract inception. For ease of illustration, assume that at contract inception the fair value of the 40 percent interest retained by Entity A is $4 million. Because all of the assets (the land) promised to Entity X in the contract are nonfinancial assets, Entity A concludes that it should derecognize the land in accordance with this Subtopic.

55-13 As described in paragraphs 610-20-25-2 through 25-7, Entity A first considers the guidance in Topic 810 and concludes that it no longer has a controlling financial interest in Entity B or in Entity X (the buyer). Entity A then determines that the contract meets the criteria in paragraph 606-10-25-1 and that control of the land has been transferred in accordance with the guidance in paragraph 606-10-25-30. Because Entity A continues to have a noncontrolling interest in Entity B, it evaluates the point in time at which Entity B, its former subsidiary, has control of the distinct nonfinancial asset as described in paragraph 610-20-25-7. Entity A concludes that it has transferred control of the distinct nonfinancial asset because Entity B controls the distinct nonfinancial asset. When evaluating the indicators of control in paragraph 606-10-25-30, Entity A concludes the following:

It has the present right to payment.
Entity B has legal title to the land.
It does not have physical possession of the asset because it cannot restrict or prevent other entities from accessing the land.
Entity B has the significant risks and rewards of ownership.
There is no acceptance clause (assumption).

Case B — Control Transfers Under Topic 810 but Not Under Topic 606

55-14 [Omitted]

55-15 Assume the same facts as in Case A, except that Entity A has the right but not the obligation to repurchase the 60 percent ownership interest in Entity B that it transferred to Entity X (that is, Entity A has a call option). The call option gives Entity A the right to repurchase the 60 percent ownership interest in 2 years for $7 million.

55-16 Entity A concludes that although the call option represents a variable interest in Entity B, it does not have a controlling financial interest in Entity B in accordance with the guidance in Topic 810. However, when evaluating whether control of the land has been transferred in accordance with the guidance in paragraph 606-10-25-30, Entity A considers the guidance on repurchase features in paragraphs 606-10-25-30(c) and 606-10-55-68 and concludes that it does not transfer control of the land. In addition, because the exercise price on the call option is an amount that is greater than the original selling price, the transaction is considered a financing agreement in accordance with the guidance in paragraph 606-10-55-68(b). Entity A does not derecognize the land and records a financial liability of $6 million in accordance with the guidance in paragraph 606-10-55-70. Entity A does not recognize an investment for its retained 40 percent ownership interest until it derecognizes the land.

Connecting the Dots

If the seller has an obligation or option to repurchase a property it has sold (a forward or call option), it should account for the sale as (1) a lease if the repurchase amount is less than the original selling price or (2) a financing arrangement if the repurchase price is more than the original selling price.

If the buyer has an option to require the seller to repurchase the property (a put option), the seller would determine whether to account for the transaction as a lease, a sale with a right of return, or a financing arrangement by performing the following analysis:

If the repurchase price under the option is lower than the original selling price, the seller would need to consider at contract inception whether the buyer has a significant economic incentive to exercise its option. If the buyer has such an incentive, the contract should be treated as a lease (unless the transaction involves a leaseback and would result in a lease-leaseback transaction, in which case the entire transaction should be treated as a financing). Otherwise, the transaction should be accounted for as a sale with a right of return.
If the repurchase price under the option is equal to or greater than the original selling price, the seller should treat the contract as a financing arrangement unless the expected fair value of the asset is greater than the repurchase price and the buyer does not have a significant economic incentive to exercise the option, in which case the transaction should be accounted for as a sale with a right of return.

If the seller of real estate is required to treat a transaction as a financing arrangement, it would continue to recognize the property (and associated depreciation) and record a liability for the consideration received from the buyer. The difference between the amount of consideration received from the buyer and the amount paid under the repurchase agreement should be recorded as interest over the term of the arrangement. If the seller is required to treat the transaction as a lease, it would account for the arrangement in accordance with ASC 842.

See Section 8.7 for further discussion of repurchase agreements and their impact on transferring control.

17.4.2 Gain or Loss Measurement

ASC 610-20

32-2 When an entity meets the criteria to derecognize a distinct nonfinancial asset or a distinct in substance nonfinancial asset, it shall recognize a gain or loss for the difference between the amount of consideration measured and allocated to that distinct asset in accordance with paragraphs 610-20-32-3 through 32-6 and the carrying amount of the distinct asset. The amount of consideration promised in a contract that is included in the calculation of a gain or loss includes both the transaction price and the carrying amount of liabilities assumed or relieved by a counterparty.

32-3 To determine the transaction price, an entity shall apply the following paragraphs in Topic 606 on revenue from contracts with customers:

Paragraphs 606-10-32-2 through 32-27 on determining the transaction price, including all of the following:
1. Estimating variable consideration
2. Constraining estimates of variable consideration
3. The existence of a significant financing component
4. Noncash consideration
5. Consideration payable to a customer.
Paragraphs 606-10-32-42 through 32-45 on accounting for changes in the transaction price.

32-4 If an entity transfers control of a distinct nonfinancial asset or distinct in substance nonfinancial asset in exchange for a noncontrolling interest, the entity shall consider the noncontrolling interest received from the counterparty as noncash consideration and shall measure it in accordance with the guidance in paragraphs 606-10-32-21 through 32-24. Similarly, if a parent transfers control of a distinct nonfinancial asset or in substance nonfinancial asset by transferring ownership interests in a consolidated subsidiary but retains a noncontrolling interest in its former subsidiary, the entity shall consider the noncontrolling interest retained as noncash consideration and shall measure it in accordance with the guidance in paragraphs 606-10-32-21 through 32-24. (See Case A of Example 2 in paragraphs 610-20-55-11 through 55-14.)

32-5 If a counterparty promises to assume or relieve a liability of an entity in exchange for a transfer of nonfinancial assets or in substance nonfinancial assets within the scope of this Subtopic, the transferring entity shall include the carrying amount of the liability in the consideration used to calculate the gain or loss. Although a liability assumed or relieved by a counterparty shall be included in the consideration used to calculate a gain or loss, an entity shall not derecognize the liability until it has been extinguished in accordance with the guidance in paragraph 405-20-40-1 (see paragraph 610-20-45-3 on how to present the liability if it is extinguished before or after the entity transfers control of the nonfinancial assets or in substance nonfinancial assets). If an entity transfers control of the nonfinancial assets or in substance nonfinancial assets before a liability is extinguished, it shall apply the guidance on constraining estimates of variable consideration in paragraph 606-10-32-11 to determine the carrying amount of the liability to be included in the gain or loss calculation.

32-6 An entity shall allocate the consideration calculated in accordance with the guidance in paragraphs 610-20-32-2 through 32-5 to each distinct nonfinancial asset or in substance nonfinancial asset by applying the guidance in paragraphs 606-10-32-28 through 32-41.

If the derecognition criteria are met (see Section 17.4.1), an entity should recognize a full gain or loss on derecognition of any nonfinancial or in-substance nonfinancial assets. The entity should include in the consideration received any liability assumed (or relieved) by the counterparty (e.g., mortgage loan on the building) when determining the gain or loss on the derecognition. In a manner consistent with the discussion in paragraph BC35 of ASU 2017-05, the entity should account for the derecognition of the asset and assumption of the liability together and accordingly recognize a single gain or loss inclusive of any liability assumed by the counterparty. Further, the entity should account for any noncontrolling ownership interest as noncash consideration, which should be measured at fair value in a manner consistent with the guidance on noncash consideration in ASC 606-10-32-21 through 32-24 (see Section 6.5). Example 2, Case A, in ASC 610-20, which is reproduced below and is also discussed in Section 17.4.1, illustrates the application of this guidance.

ASC 610-20

Example 2 — Transfer of Control

Case A — Control Transfers Under Topics 810 and 606

55-13 [Omitted]

55-14 Entity A derecognizes the land and calculates the gain or loss as the difference between the amount of consideration measured in accordance with the guidance in paragraphs 610-20-32-2 and 610-20-32-6 and the carrying amount of the land. The amount of the consideration is $10 million, which includes $6 million in cash plus $4 million for the fair value of the noncontrolling interest in Entity B. Entity A recognizes a gain of $5 million ($10 million consideration – $5 million carrying amount of the assets) and presents the gain in the income statement in accordance with the guidance in paragraph 360-10-45-5. In accordance with the guidance in paragraph 610-20-32-4, Entity A records the noncontrolling interest in Entity B at $4 million and subsequently accounts for that interest in accordance with other Topics.

17.4.2.1 Accounting for the Sale of a Nonfinancial Asset Within the Scope of ASC 610-20 That Involves a Guarantee

When a seller has entered into a contract to sell property and guarantee the buyer’s return on the property, the seller must first identify all of the elements in the contract to determine whether the contract is (1) within the scope of ASC 610-20, (2) within the scope of other topics, or (3) partially within the scope of both ASC 610-20 and other topics. A contract to sell property to a counterparty that includes a guarantee of the buyer’s return on the property contains both a nonfinancial asset within the scope of ASC 610-20 and a guarantee within the scope of ASC 460-10.

ASC 610-20-15-9 refers entities to ASC 606-10-15-4 for guidance on determining how to separate and measure elements in a contract that is within the scope of other topics. ASC 606-10-15-4(a) states, in part:

If the other Topics specify how to separate and/or initially measure one or more parts of the contract, then an entity shall first apply the separation and/or measurement guidance in those Topics. An entity shall exclude from the transaction price the amount of the part (or parts) of the contract that are initially measured in accordance with other Topics.

Accordingly, the seller would initially measure the guarantee at fair value as required under ASC 460-10. The difference between the transaction price and the guarantee’s fair value would be allocated to the identified element(s) — which may include other assets or services in addition to the property being sold — and any gain or loss would be recognized when (or as) control of each element is transferred to the buyer.

However, if the seller determines that the contract (which includes the guarantee) will result in a loss and if control of the underlying nonfinancial asset has not yet been transferred to the counterparty, the seller should evaluate whether an impairment has occurred under relevant impairment guidance (e.g., ASC 330 on inventory, ASC 350 on intangibles, or ASC 360 on property, plant, and equipment).

Example 17-3

Company X sells an office building with a cost basis of $40,000 to Company Y for $100,000. As part of the sales contract, X guarantees that it will make payments of up to $40,000 each year for two years based on the proportion of the building that remains unleased at the end of each year. Since X expects all space to be rented within two months, it has determined that its guarantee to Y has a fair value of $15,000.

Company X should separate and initially measure the guarantee in accordance with ASC 460-10 and then deduct the fair value of the guarantee ($15,000) from the transaction price of $100,000. After allocating the remaining $85,000 to the sole nonfinancial asset (i.e., the building), X would recognize a $45,000 gain ($85,000 allocated to the building less X’s cost basis of $40,000) upon transferring control of the building to Y.

Example 17-4

Assume the same facts as in the example above, except that Company X (1) determines on the basis of the current rental market that the space will not be leased for the foreseeable future and (2) calculates that the fair value of the guarantee is $70,000.

Company X should separate and initially measure the guarantee in accordance with ASC 460-10 and then deduct the fair value of the guarantee ($70,000) from the transaction price of $100,000. Company X would allocate the remaining $30,000 to the building. Since this allocation is less than the building’s book value, if control of the building has not yet been transferred to Company Y, X should assess whether the building is impaired on the basis of the requirements in ASC 360.

17.4.2.2 Variable or Contingent Consideration

Any contingent consideration included in the transaction price should be estimated and constrained in a manner consistent with ASC 606, as further discussed in Section 6.3.

Example 3 in ASC 610-20, which is reproduced below, illustrates how an entity would account for a sale of a nonfinancial asset in exchange for variable consideration.

ASC 610-20

Example 3 — Sale of a Nonfinancial Asset for Variable Consideration

55-17 An entity sells (that is, does not out license) the rights to in-process research and development that it recently acquired in a business combination and measured at fair value of $50 million in accordance with Topic 805 on business combinations. The entity concludes that the transferred in-process research and development is not a business. The buyer of the in-process research and development agrees to pay a nonrefundable amount of $5 million at inception plus 2 percent of sales of any products derived from the in-process research and development over the next 20 years. The entity concludes that the sale of in-process research and development is not a good or service that is an output of the entity’s ordinary activities.

55-18 Topic 350 on goodwill and other intangibles requires the entity to apply the guidance in this Subtopic to determine the amount and timing of income to be recognized. Therefore, the entity applies the derecognition guidance in this Subtopic as follows:

The entity concludes that it does not have a controlling financial interest in the buyer.
The entity concludes that the contract meets the criteria in paragraph 606-10-25-1.
The entity also concludes that on the basis of the guidance in paragraph 606-10-25-30, it has transferred control of the in-process research and development asset to the buyer. This is because the buyer can use the in-process research and development’s records, patents, and supporting documentation to develop potential products and the entity has relinquished all substantive rights to the in-process research and development asset.
In estimating the consideration received, the entity applies the guidance in Topic 606 on determining the transaction price, including estimating and constraining variable consideration. The entity estimates that the amount of consideration that it will receive from the sales-based royalty is $100 million over the 20-year royalty period. However, the entity cannot assert that it is probable that recognizing all of the estimated variable consideration in other income would not result in a significant reversal of that consideration. The entity reaches this conclusion on the basis of its assessment of factors in paragraph 606-10-32-12. In particular, the entity is aware that the variable consideration is highly susceptible to the actions and judgments of third parties, because it is based on the buyer completing the in-process research and development asset, obtaining regulatory approval for the output of the in-process research and development asset, and marketing and selling the output. For the same reasons, the entity also concludes that it could not include any amount, even a minimum amount, in the estimate of the consideration. Consequently, the entity concludes that the estimate of the consideration to be used in the calculation of the gain or loss upon the derecognition of the in-process research and development asset is limited to the $5 million fixed upfront payment.

55-19 At inception of the contract, the entity recognizes a net loss of $45 million ($5 million of consideration, less the in-process research and development asset of $50 million). The entity reassesses the transaction price at each reporting period to determine whether it is probable that a significant reversal would not occur from recognizing the estimate as other income and, if so, recognizes that amount as other income in accordance with paragraphs 606-10-32-14 and 606-10-32-42 through 32-45.

17.4.2.3 Like-Kind Exchanges of Nonfinancial Assets

Entities may also enter into like-kind exchanges in which a nonfinancial asset owned by one entity is exchanged for a nonfinancial asset owned by another entity. These types of transactions may include the exchange of real estate and are typically structured for tax purposes. Under the revenue standard, a nonmonetary exchange of a nonfinancial asset is accounted for as a sale of the nonfinancial asset for noncash consideration (i.e., the nonfinancial asset received from another entity). Accordingly, if the transaction meets the criteria to be accounted for as a sale (i.e., the existence of a contract and the transfer of control of the nonfinancial asset), the entity would measure the noncash consideration received in the transaction at fair value.3 The entity would recognize a gain or loss on the sale and record the acquired nonmonetary consideration (i.e., the nonfinancial asset received) at its fair value. Further, ASU 2017-05 eliminates the guidance in ASC 845 on exchanges of nonfinancial assets for a noncontrolling interest. As a result, if the derecognition criteria are met (see Section 17.4.1), the noncontrolling interest received in connection with the partial sale is measured at fair value and included in the transaction price (see Section 17.5).

However, the entity would continue to apply the guidance on nonmonetary exchanges in ASC 845 if the exchange is between entities in the same line of business to help facilitate sales to potential customers.

Footnotes

When recognizing a gain or loss on sales of nonfinancial assets or in-substance nonfinancial assets that are not contracts with customers, an entity must first consider whether, under ASC 810, it ceases to have a controlling financial interest in the legal entity that holds the nonfinancial assets or in-substance nonfinancial assets. If the controlling financial interest is lost, the entity should then consider whether control of the nonfinancial assets or in-substance nonfinancial assets is transferred in accordance with ASC 606 (see Section 17.4.1).

As noted in Section 6.5, ASU 2016-12 clarifies that the measurement date for noncash consideration is the contract inception date.

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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.