Best guide IFRS 16 Lessor modifications
summarises the accounting for lessor modifications that depends on – and may change – the lease classification.
Unlike IAS 17 Leases, the new standard provides detailed guidance on the lessor accounting for lease modifications, with separate guidance for modifications to finance leases and operating leases.
However, additional complexities arise for modifications of a finance lease receivable not accounted for as a separate lease for which, under paragraph 80(b) of IFRS 16, the lessor applies the requirements of IFRS 9 Financial Instruments. A number of issues arise due to differences in the basic concepts between IFRS 16 and IFRS 9.
The following diagram summarises the accounting for lease modifications by a lessor.
| Separate lease | Not a separate lease – Finance to operating | Not a separate lease – Finance to finance | Lessor modifications to operating expenses |
* A lessee reassessment of whether it is reasonably certain to exercise an option to extend, or not to exercise a termination option, included in the original lease contract is not a lease modification