CERTYNEX IFRS ACADEMY

The Kestrel laboratory leases a research building with a purchase option that it had not considered reasonably certain to exercise. After installing very costly clean rooms, Kestrel concludes that it will exercise the option. The lessor does not provide the data needed to compute the interest rate implicit in the lease for the remaining term. The CFO hesitates between several treatments. Which one complies with IFRS 16?

Remeasure the liability by adding the exercise price, discounted at the original rate of the lease, to ensure consistency of methods.

Remeasure the liability at the current incremental borrowing rate, including the exercise price, and recognise the difference as a finance cost of the year.

Include the exercise price in the revised lease payments, discount at the incremental borrowing rate at the reassessment date and adjust the right-of-use asset.

Change nothing until the option is legally exercised, since the contractual payments are unchanged.