Transcription of Lease modifications extending the lease term
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Lease modifications extending the lease term
01 Lease modifications extending the Lease term 2 Contents Contents 2 Introduction 3 The focus of this publication 4 Interaction with transition reliefs 5 Steady-state application 8 extending a Lease when should the additional RoU asset and Lease liability be recognised? 8 Extension via a new contract 9 Extension plus a new asset at market rates 11 Extension plus a new asset not at market rates 12 Assessment of the Lease term upon a Lease extension 14 Scope of the modification guidance 18 Key takeaways 21 Appendix relevant IFRS 16 guidance 22 Contacts 24 03 Introduction Seemingly innocuous changes to an agreement could be a Lease modification .
A lease modification includes adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term. IFRS 16’s lease modification guidance can be summarised into the following diagram: Broadly speaking, a lease modification is accounted for in one of two ways: 1.
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