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The two criteria are: The modification grants the lessee an additional right-of-use not specified in the original lease (for example, the right to use additional assets or additional floors/space in a building)

As can be seen from the diagram, a modification will only be treated as a separate lease if it involves the addition of one or more underlying assets at a price that is commensurate with the standalone price of the increase in scope. 1 All other modifications are not treated as a separate lease.

Rent deferral means an agreement between a landlord and a tenant to delay the payment of a portion of a specific amount of rent obligations until a later date; Sample 1.

Deferred rent is a balance sheet account traditionally used in legacy accounting standards as defined in ASC 840. Deferred rent arises when the amount expensed exceeds the amount paid. A balance will build up and then burn off when the cash paid exceeds the amount expensed.

To calculate straight-line rent, aggregate to rent payments' total cost and divide it by the total contract term. The result is the amount that needs to be charged for the expense in each month of the contract.

For example, if the lease agreement is 12 months with a payment of $1,000 each month and the company is given a one-month free rent on the first month, then the deferred rent is $916.67 ($1,000 x 11 / 12).

A lease modification is defined as a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease.

According to the IFRS 16, A re-assessment of the lease liability takes place if the cash flows change based on the original terms and conditions of the lease. Changes that were not part of the original terms and conditions of the lease would be considered as lease modifications.

When a lease modification is accounted for as a new lease, the lessee accounts for the separate lease in the same way as any new lease, using a new discount rate. A lessee revises the discount rate when there is a modification that is not accounted for as a separate lease.

Lease modification: A change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term).