IFRS 16Chapter 7Lesson 3
Lease modifications for the lessee, IBOR reform and Covid-19 rent concessions
Step 1 of 7Learning objectives
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When lessee and lessor renegotiate the contract, the first question is whether the modification creates a separate lease. If not, the lease liability is remeasured at a revised rate at the effective date: a decrease in scope gives rise to a gain or loss, other modifications adjust the right-of-use asset. Two special regimes complete the picture: interest rate benchmark (IBOR) reform and the historical relief for Covid-19-related rent concessions.
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Learning objectives
- Distinguish a lease modification from a mere reassessment, and determine whether the modification forms a separate lease.
- For a modification that is not a separate lease, remeasure the lease liability at a revised rate at the effective date.
- Account for a decrease in scope (gain or loss) and other modifications (adjustment to the right-of-use asset), including the entries.
- Explain the special regimes for IBOR reform and Covid-19-related rent concessions, and their conditions.