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Facts: On $1/1/$x$1,$ Andale's Spanish subsidiary, SpainCo, leases a vacant restaurant $($with a fair value of $$2$ million$)$ in Barcelona for a $4-$year term with fixed payments amounting to the equivalent of $$6,000$ USD per month in year $1,$ payable at the end of each month, with monthly rent escalating annually on Jan. $1$ by the change in CPI in each subsequent year of the contract. SpainCo's incremental borrowing rate is $5\mathrm{.}5\%.$ Assume the restaurant's useful life is $25$ years, and assume that SpainCo is a public company with publicly$-$traded securities and has a calendar year$-$end.

a$.$ Determine the financial reporting framework applicable to SpainCo's financial reporting.

b$.$ Determine the classification of this lease on SpainCo's subsidiary$-$level financial statements.

c$.$ Determine the initial measurement for the lease as of $1/1/$x$1,$ then show the journal entries required at $12/31/$x$1$ to reflect activity through the year x$1.$

d$.$ As of $1/1/$x$2,$ CPA has escalated by $3\mathrm{.}2\%$ and SpainCo's current incremental borrowing rate is $6\%.$ Determine whether the lease liability should be remeasured for this change and determine the impact $($if any$)$ on the right$-$of$-$use asset.

e$.$ Provide the journal entries to reflect activity throughout the year $12/31/$x$2.$

f$.$ Next, identify differences in this reporting compared to U$.$S$.$ GAAP, as Andale will need to reconcile this reporting to GAAP for its consolidated financial statements.

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