Resize Lease For Free

(b) A lessee would reassess variable lease payments that depend on an index or a rate only when it is reassessing the lease liability for other reasons (for example, when there is a change to the lease term upon the occurrence of a significant event or a significant change in circumstances within the control of the ...

IFRS 16 Leases contains detailed guidance on how to account for lease modifications. 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.

The new lease is recorded on the commencement date of the new lease, which is the date the lessee has access to the leased asset. For example, if a lessee modifies a lease to use additional space in a building, the new lease should be recorded once that space is available for use.

Examples of Triggering Events for Lease Reassessments Construction of significant leasehold improvements. Subleasing an asset for a period beyond end of the current lease term. Significantly modifying or customizing the asset. Making a business decision directly relevant to option exercise.

A lessee is required to reassess the lease term on the occurrence of a significant event or change in circumstances that is within its control and directly affects whether it is reasonably certain to exercise (or not to exercise) an option included in the original contract.

If the lease meets any of the criteria, then it must be recorded as a finance lease. The five criteria relates to a bargain purchase option, transfer of ownership, net present value of lease payments, economic life, and whether the asset is specialized.

If you know you're likely to exceed your mileage allotment, some lessors will allow you to negotiate for a higher mileage cap in what's often referred to as a high-mileage lease. Keep in mind that a high-mileage lease will generally cost you more money.