Lease modifications and short-term leases

Are you prepared for the changes?

Seemingly easy changes to a lease agreement could be considered as a lease modification under IFRS 16. They could impact your Right of Use (RoU) asset and lease liability at unexpected times with major consequences for balance sheet ratios.

Our publications provide practical guidance and step-by-step explanations of the accounting implications arising from lease modifications. We also cover as part of our publications guidance on various subsequent changes that might impact a short-term lease`s classification.

Lease modifications – extending the lease term

This publication focuses on the extension of a lease. Specifically, it addresses the following issues:

  1. What constitutes a lease modification?
  2.  When should a lease modification be accounted for?
  3. What is the impact of a lease modification on the lease term?
  4. How do the modification requirements interact with transition reliefs?

We have chosen to focus on modifications involving lease extensions because they are pervasive and could have a material impact on the amounts recognised in the financial statements; yet it is an area that is often overlooked by practitioners.

Lease modifications – ten comprehensive examples

While IFRS 16 is not a large standard in terms of pages when compared to other more recent standards, it is a standard that is raising many practical and interpretational issues. Modifications is a particular area which has raised issues and the devil is in the detail.

This very practical publication runs through some of the accounting for these modifications with a series of ten scenarios that build on the various permutations of lease modifications in a logical manner, explaining the principles and concepts while providing easy to follow numeric examples.

Short term leases

This publication, in line with previous guidance in this series, provides a step-by-step explanation of the accounting implications of the various subsequent changes that might impact a short-term lease’s classification using practical and easy to follow examples.

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