Modification

Modification

Change in Change in Change in

Lease Term Consideration Asset Base

Increase Reduction Increase Reduction Increase Reduction

Modification Affecting Profit & Loss Modification Not Affecting Profit & Loss

Increase Reduction
Reduction Reduction In In
In Lease Term In Asset Base Consideration Consideration

Increase Increase
In Lease Term In Asset Base
 Increase in Asset Base

Change in rentals & Increase in

Lease Terms

Reduction in Asset Base

Reduction in lease term

4 Accounting Treatments
 Increase in
Asset Base

At Market Not At Market

Rental Rental

Adjusted in
Separate
old lease
Lease
Contract
 Separate Adjusted in old
Lease lease Contract

Find new lease liability & ROUA for find combined lease liability using
1 1
separate lease using current applicable • Combined Rental
rate • New Rate

2 Follow 2 lease liabilities schedules &

2 Incorporate increase of lease liability in
ROUA A/Cs
ROUA.

3 Depreciate ROUA (Increased balance)

over the lease term

4 Amortize lease liability using new rate

 Increase in Asset Base

Change in rentals & Increase in

Lease Terms

Reduction in Asset Base

Reduction in lease term

4 Accounting Treatments
 Change in rentals & Increase in Lease Terms

1
Present value of modified cash flows using new rate to find new lease liability
2
Compare new balance of Lease Liability with previous balance
3
Take the change to ROUA

4
Depr. ROUA over new lease term

5
Amortize lease liability using new rate term
 Increase in Asset Base

Change in rentals & Increase in

Lease Terms

Reduction in Asset base

Reduction in lease term

4 Accounting Treatments
 Reduction in Asset base
1
Proportionately reduce lease liability & ROUA & find gain/loss

2 Adj lease liability using

• New Rental
• New Rate
3 Find change in lease liability & take it to ROUA

4 Depr. ROUA over remaining lease term

5
Amortize new lease liability using new rate
 Increase in Asset Base

Change in rentals & Increase in

Lease Terms

Reduction in Asset Base

Reduction in Lease Terms

4 Accounting Treatments
 Reduction in Lease Terms
1
Reduce ROUA proportionality
2
Find PV of old rentals at old rate to find adjusted balance of lease liability.
3 Difference between old and new liability is derecognized along with
proportionate ROUA and find gain / loss
4 Re calculate lease liability balance using
• Revised rentals
• Revised lease term
• Revised rate
5
Change in lease liability is take as an adjustment to ROUA