CERTYNEX IFRS ACADEMY

Fitralis leases a forklift for 9 months, with no purchase option, and applies the short-term lease exemption to this class of assets. After 7 months, it agrees with the lessor to extend the lease by 4 months. Accountant's analysis: (1) the original lease was indeed a short-term lease; (2) the extension changes the lease term; (3) since the total term reaches 13 months, the original lease must be restated from its commencement date, with a right-of-use asset and a lease liability recognised at that date; (4) the payments already expensed are reversed. Which step contains the fundamental error?

Step 1: a 9-month lease cannot benefit from the short-term lease exemption.

Step 2: a negotiated extension does not change the lease term.

Step 3: when there is a modification or a change in the lease term, the lessee considers the lease to be a new lease, without restating the original lease.

Step 4: only the payments for the 4 months of extension must be reversed.