IFRS 16Chapter 5Lesson 1
The lease term
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The lease term is not simply the period written in the lease: it is the non-cancellable period, plus the optional periods that the lessee is reasonably certain to use. The lesson shows how to determine the enforceable period, assess reasonable certainty from economic incentives, measure the effect of that judgement on the lease liability and know when the term must be reassessed or revised.
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Learning objectives
- Explain what makes up the lease term (non-cancellable period and optional periods).
- Determine the enforceable period according to the termination rights of the lessee and the lessor.
- Assess reasonable certainty of exercising an option from economic incentives and measure its effect on the lease liability.
- Distinguish reassessment of reasonable certainty from revision of the term, and identify the events that trigger them.