IFRS16 Lease Modifications - Lessee
Posted: 13 Apr 2021, 10:33
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.
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.
