Mirabel leases 2,000 units m² of offices. On 1 July 20X4, an amendment allows it to return 800 units m² for the remaining term; the remaining payments are reduced in the same proportion. At that date, the right-of-use asset has a carrying amount of 300,000 and the lease liability of 350,000. Case data: the interest rate implicit in the lease cannot be readily determined and Mirabel's incremental borrowing rate at the effective date happens to equal the original rate; Mirabel measures the partial termination in proportion to the area returned (method chosen for the case). Compute the decrease in the right-of-use asset, the modified lease liability and the gain or loss.
- Carrying amount of the right-of-use asset
- 300,000
- Lease liability before the modification
- 350,000
- Area originally leased (m²)
- 2,000
- Area returned (m²)
- 800