Revise Lease For Free

A modification is accounted for as a separate new lease IF: ? It increases the scope of the lease by adding the right to use one. or more underlying assets; AND. ? Consideration increases by an amount commensurate with the. stand-alone price for the increase in scope.

Revision of rent means the rent is to be revised in respect of existing and new tenancies ingto the formula given under section 7 and 8 of the Act; Sample 1.

Account for the lease modification as a termination of the original lease and creation of a new lease from the effective date of the modification. Measure the carrying amount of the underlying asset as the net investment in the original lease immediately before the effective date of the modification.

IFRS 16 requires companies to reassess the lease term during the life of a lease contract in specific circumstances. This requirement and that to reassess other key estimates and judgements if the lease term changes, introduces financial statement volatility.

IFRS 16 defines a lease modification 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 (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term)'.

A change in the lease term or the assessment of whether the lessee will exercise an option to purchase the underlying asset and the discount rate for the lease already reflects that the lessee has an option to extend or terminate the lease or to purchase the underlying asset.

Under ASC 840, a lessee cannot record a capital lease asset at an amount greater than the fair value of the asset. In such scenarios, companies are required to increase the discount rate to a rate that will reduce the asset, and the lease liability, to an amount equal to the fair value of the underlying asset.