diff --git a/python/src/com/jetbrains/python/codeInsight/controlflow/PyControlFlowBuilder.java b/python/src/com/jetbrains/python/codeInsight/controlflow/PyControlFlowBuilder.java
index 4bacc017a574..f000baff0d1c 100644
--- a/python/src/com/jetbrains/python/codeInsight/controlflow/PyControlFlowBuilder.java
+++ b/python/src/com/jetbrains/python/codeInsight/controlflow/PyControlFlowBuilder.java
@@ -3,14 +3,11 @@ package com.jetbrains.python.codeInsight.controlflow;
 import com.intellij.codeInsight.controlflow.ControlFlow;
 import com.intellij.codeInsight.controlflow.ControlFlowBuilder;
 import com.intellij.codeInsight.controlflow.Instruction;
-import com.intellij.lang.ASTNode;
 import com.intellij.openapi.util.Pair;
 import com.intellij.openapi.util.Ref;
 import com.intellij.psi.PsiElement;
 import com.intellij.psi.PsiNamedElement;
-import com.intellij.psi.tree.TokenSet;
 import com.intellij.psi.util.PsiTreeUtil;
-import com.jetbrains.python.PyElementTypes;
 import com.jetbrains.python.PyNames;
 import com.jetbrains.python.psi.*;
 import com.jetbrains.python.psi.impl.ParamHelper;
@@ -26,9 +23,6 @@ import java.util.List;
  * @author oleg
  */
 public class PyControlFlowBuilder extends PyRecursiveElementVisitor {
-
-  public static final TokenSet CALL_OR_REF_EXPR = TokenSet.create(PyElementTypes.CALL_EXPRESSION, PyElementTypes.REFERENCE_EXPRESSION);
-  public static final String SELF_ASSERT_RAISES = "self.assertRaises";
   private final ControlFlowBuilder myBuilder = new ControlFlowBuilder();
 
   public ControlFlow buildControlFlow(@NotNull final ScopeOwner owner) {
@@ -711,42 +705,18 @@ public class PyControlFlowBuilder extends PyRecursiveElementVisitor {
 
   @Override
   public void visitPyWithStatement(final PyWithStatement node) {
-    boolean withSelfAssertRaises = false;
-    final PyWithItem[] items = node.getWithItems();
-    if (items.length == 1){
-      final PyWithItem item = items[0];
-      final ASTNode callNode = item.getNode().findChildByType(CALL_OR_REF_EXPR);
-      if (callNode != null) {
-        final PsiElement element = callNode.getPsi();
-        if (element instanceof PyCallExpression) {
-          final PyExpression callee = ((PyCallExpression)element).getCallee();
-          if (callee != null) {
-            final String repr = PyUtil.getReadableRepr(callee, true);
-            withSelfAssertRaises = SELF_ASSERT_RAISES.equals(repr);
-          }
-        }
-        if (element instanceof PyReferenceExpression){
-          withSelfAssertRaises = SELF_ASSERT_RAISES.equals(element.getText());
-        }
-      }
-    }
     super.visitPyWithStatement(node);
-    if (withSelfAssertRaises){
-      myBuilder.processPending(new ControlFlowBuilder.PendingProcessor() {
-        public void process(final PsiElement pendingScope, final Instruction instruction) {
-          final PsiElement element = instruction.getElement();
-          if (element == null){
-            myBuilder.addPendingEdge(pendingScope, instruction);
-          }
-          else if (PsiTreeUtil.getParentOfType(element, PyRaiseStatement.class) != null){
-            myBuilder.addPendingEdge(node, instruction);
-          }
-          else {
-            myBuilder.addPendingEdge(pendingScope, instruction);
-          }
+    myBuilder.processPending(new ControlFlowBuilder.PendingProcessor() {
+      public void process(final PsiElement pendingScope, final Instruction instruction) {
+        final PsiElement element = instruction.getElement();
+        if (PsiTreeUtil.getParentOfType(element, PyRaiseStatement.class) != null) {
+          myBuilder.addPendingEdge(node, instruction);
+        }
+        else {
+          myBuilder.addPendingEdge(pendingScope, instruction);
         }
-      });
     }
+  });
   }
 
   private void abruptFlow(final PsiElement node) {
diff --git a/python/testData/inspections/PyUnreachableCodeInspection/WithSuppressedExceptions.py b/python/testData/inspections/PyUnreachableCodeInspection/WithSuppressedExceptions.py
new file mode 100644
index 000000000000..d0e49836e683
--- /dev/null
+++ b/python/testData/inspections/PyUnreachableCodeInspection/WithSuppressedExceptions.py
@@ -0,0 +1,12 @@
+class C(object):
+    def __enter__(self):
+        return self
+
+    def __exit__(self, exc, value, traceback):
+        return True
+
+
+def f():
+    with C():
+        raise Exception()
+    x = 1 #pass
diff --git a/python/testSrc/com/jetbrains/python/inspections/PyUnreachableCodeInspectionTest.java b/python/testSrc/com/jetbrains/python/inspections/PyUnreachableCodeInspectionTest.java
index 5c651b687d14..80e2e32d4318 100644
--- a/python/testSrc/com/jetbrains/python/inspections/PyUnreachableCodeInspectionTest.java
+++ b/python/testSrc/com/jetbrains/python/inspections/PyUnreachableCodeInspectionTest.java
@@ -9,19 +9,29 @@ import com.jetbrains.python.psi.LanguageLevel;
 public class PyUnreachableCodeInspectionTest extends PyTestCase {
   private static final String TEST_DIRECTORY = "inspections/PyUnreachableCodeInspection/";
 
-  // All previous unreachable tests
+  // All previous unreachable tests, feel free to split them
   public void testUnreachable() {
-    doTest();
-  }
-
-  private void doTest() {
-    runWithLanguageLevel(LanguageLevel.PYTHON27, new Runnable() {
+    runWithLanguageLevel(LanguageLevel.PYTHON26, new Runnable() {
       @Override
       public void run() {
-        myFixture.configureByFile(TEST_DIRECTORY + getTestName(false) + ".py");
-        myFixture.enableInspections(PyUnreachableCodeInspection.class);
-        myFixture.checkHighlighting(true, false, false);
+        doTest();
       }
     });
   }
+
+  // PY-7420
+  public void testWithSuppressedExceptions() {
+    runWithLanguageLevel(LanguageLevel.PYTHON26, new Runnable() {
+      @Override
+      public void run() {
+        doTest();
+      }
+    });
+  }
+
+  private void doTest() {
+    myFixture.configureByFile(TEST_DIRECTORY + getTestName(false) + ".py");
+    myFixture.enableInspections(PyUnreachableCodeInspection.class);
+    myFixture.checkHighlighting(true, false, false);
+  }
 }