IFRS 16 Lease term explained or the lease term includes the following items (IFRS 16 18):
- non-cancellable period of a lease; IFRS 16 Lease term explained
- periods covered by an option to extend the lease – if the lessee (customer) is reasonably certain to exercise that option; and
- periods covered by an option to terminate the lease – if the lessee (customer) is reasonably certain not to exercise that option.
The lease term should not go beyond the ‘enforceable period’ which lasts up to a point when both parties have the right to terminate the lease without permission from the other party with no more than an insignificant penalty (IFRS 16 B34).
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