IFRS16 Lease Modifications - Lessee

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timc
Posts: 2
Joined: 01 Nov 2020, 19:39

IFRS16 Lease Modifications - Lessee

Post by timc »

Hi all,

A lease is recognised under IFRS16 and is accounted for with a RoU asset and Lease Liability. Nearing the end of the lease term, the terms are renegotaited with the landlord. For this example, it would be a decrease in lease term and extension of the end date. Therefore not resulting in the accounting for this "modification" as a separate lease.

My questions is, if during this renegotiation, a completely new contract is drawn up and signed, is this still ok to be classed as a lease modification? Or does it have to be an amendment to the existing contract. For example adding in a section and referencing the original contract. Or can a completley new contract, with new signatures, etc with the same counter-party be ok to be classed as a modification to the orignal?

My inital thoughts are; Substance over form. It is a lease modification in substance, I think. The legal and contracts view should be secondary.

Thanks for your input.
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Marek Muc
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Re: IFRS16 Lease Modifications - Lessee

Post by Marek Muc »

I totally agree with your initial view :)

IFRS 15 has some good guidance on this:
https://ifrscommunity.com/knowledge-bas ... -contracts
timc
Posts: 2
Joined: 01 Nov 2020, 19:39

Re: IFRS16 Lease Modifications - Lessee

Post by timc »

Thank you for your reply Marek.

Rgds,
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