IFRS 16Chapter 7Lesson 2
Remeasuring the lease liability: revised or unchanged discount rate
Step 1 of 7Learning objectives
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After the commencement date, the expected lease payments can change without the contract being renegotiated: the lease term changes, a purchase option becomes certain, an index moves the payments, a residual value guarantee evolves. The lessee then remeasures the lease liability, with a revised or an unchanged rate depending on the event, and adjusts the right-of-use asset; only the part of a decrease that exceeds the carrying amount of that asset goes to profit or loss.
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Learning objectives
- Recognise the four events that require the lease liability to be remeasured without a lease modification.
- Choose the right discount rate: revised rate (lease term, purchase option) or unchanged rate (residual value guarantee, index or rate), with the exception for floating interest rates.
- Calculate the new lease liability, the adjustment to the right-of-use asset and any excess in profit or loss, then record the entry.
- Draw the consequences for later periods: new depreciation of the right-of-use asset and interest at the new rate.