Publications Financial Reporting Developments. The accounting for lease modifications can be complex. 10.1 Data extraction challenges 49 10.2 Key transition decisions for tenants 50 10.3 Sale-and-leaseback on transition 53. KPMG's new publication will help companies understand accounting under IFRS 16 for common forms of lease modifications. This guide was fully updated in October 2020. lease components (services) from lease components. We provide detailed Q&As, examples and observations, as well as comparisons to legacy US GAAP, updated for continuing developments in practice. 9 Sale-and-leaseback 46 10 Transition considerations 49. PREPARING FOR 2019. b) Otherwise, the lessor should apply the requirements of Ind AS 109, Financial Instruments. Meet the IFRS team . Subject AccountingLink. IFRS Newsletter: Leases. 1000. A lease modification is defined as a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease. Changes in estimates or circumstances do not give rise to a new classification of a lease (IFRS 16.66). KPMG Executive Education. That model was criticised for failing to meet the needs of investors and analysts because it did not always provide a faithful representation of leasing transactions. I teach accounting for the lease modifications in the IFRS Kit and believe me, it is not an easy thing, especially if the lessee has many leases. Accounting for the modification: Remeasure lease liability: $1,100,000 Filed under: Leases. ROUA: $200,000. Modification of financial instruments and/or lease contracts to change the contractual benchmark rate may result in a reassessment of the existing contracts. The International Accounting Standards Board (the Board) has issued amendments . Lessees and lessors receiving rent concessions resulting from coronavirus (COVID-19), the civil unrest in Hong Kong and other unforeseen events. Lease modifications may also prompt remeasurement of the lease liability unless they are to be treated as separate leases. Understand the impact of the new leases standard, ASC 842, read KPMG's overviews of the leases guidance. Applicability. Discounts Available for Groups of 3 or More! Each one focuses on a particular aspect and includes explanations of the requirements and examples showing them in practice, to help you apply the new standard. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. In-depth application guidance on the new leasing standard. Lease Modifications. Lease classification is reassessed only if there is a lease modification. Volume Discount! Applicability. We are releasing our in-depth application guidance on IFRS 16 Leases in manageable chunks, one chapter at a time. 15 Dec 2020 PDF. The previous lease accounting model required lessees and lessors to classify their leases as either finance leases or operating leases and account for those two types of leases differently. By the end of this module you will be able to determine what is a lease modification, identify whether a modification is a separate lease or whether it is an adjustment to an existing lease and apply lease modification accounting. Subscribe. Find out more Our Real estate leases – The landlord perspective (PDF 1.4 MB) publication covers key areas of IFRS 16 that are particularly relevant to landlords in real estate leases. Under the new standard, other accounting changes include accounting for sub-leases, lease modifications, and sale and leaseback arrangements. CPE seminars … Topics Leases. Some industries were hit harder by the pandemic than others. IASB ® Board project Phase I: pre-IBOR reform issues. Quarterly update from KPMG on accounting and financial reporting developments, including SEC matters and FASB activity. A lease modification includes adding or Individuals who register for any 2 KPMG Executive Education virtual seminars can save! KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity. PwC’s Leases guide is a comprehensive resource for lessees and lessors to account for leases under the new leases standard (ASC 842). 15 mins; Online tutorial; In this topic we be look at the lease modifications for lessees. Subscribe to our IFRS Perspectives Newsletter . Y% Difference: Lease liability. Link copied Overview. Read more. Remeasure lease liability using revised discount rate* Remeasure right-of-use asset by same amount ; No P&L impact * The prevailing incremental borrowing rate at date of modification is used unless the implicit rate in the lease is readily determinable. A lease modification (as considered in this document – does not address changes in the leased asset, such as decreases in leased space) arises when the lease contract is altered such that future cash flows and/or the scope of the lease changes. Operating lease. Digital Self-Studies. The IASB Board has a two-phase project to assist in a smoother transition away from IBOR. Company Y uses the IBR at the DIA resulting in an increase to the lease liability of $291,000 from $267,000 to $558,000. Example 1 . Lease modifications for lessees. For example, the lessee may be required to recalculate lease liabilities using a revised discount rate and adjust right-of-use assets. AASB 16 Leases: Modifications and implementation – Webinar AASB 16 Leases – Modifications and implementation Watch a recording of our webinar held on 23 October 2018 which outlines key implementation considerations for AASB 16. Lease modifications – ten comprehensive examples. The increase in liability of $291,000 is adjusted against the ROU asset, resulting in a ROU asset of $512,000. KPMG’s global IFRS leasing standards leader. Secondly, the length of the lease term determines whether a lease qualifies for the short-term lease exemption. From the reference library. $1,100,000: $800,000. Guidance for lessors remains substantially unchanged from IAS 17. This webinar, hosted by KPMG Partner Patricia Stebbens, … So the service component will either be separated or the entire contract will be treated as a lease. Lease modifications: Numbers and journal entries IFRS 16 Leases contains detailed guidance on how to account for lease modifications. Q4 2020 Quarterly Outlook. All other lease modifications. 8.1 Increase in leased space – Adding a floor 40 8.2 Increase in lease term 41 8.3 Reduction in rent 43 8.4 Compensation for inconvenience 45. Latest edition: In this handbook, KPMG explains the new leases standard (ASC 842) in detail. KPMG reports on the … Patricia Stebbens KPMG Australia Michael Voogt KPMG Australia Also on home.kpmg. 8 Lease modifications 40. [IFRS 16:36(c)] Covid-19-related rent concessions A lessee may elect not to assess whether a COVID-19-related rent concession is a lease modification. 1 IAS 17, Leases 2 IFRIC 4, Determining whether an Arrangement Contains a Lease 3 IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors 4 IFRS 16 provides lessees with optional recognition exemptions for leases of low-value items and leases with a lease term of 12 months or less. IAS 17 prescribes the accounting policies and disclosures applicable to leases, both for lessees and lessors. $300,000: 12 years. The new standard could also impact entities beyond accounting, as discussed on the next … Learn more. This edition of . However, KPMG has put together practical guidance and examples to help lessors account for rent concessions treated as lease modifications in our publication Leases – Rent concessions. Finance leases: initial recognition and measurement Summary of the initial recognition and measurement. Share. Financial Reporting Developments - Lease accounting - Accounting Standards Codification 842, Leases. In its final public meeting on the leases project, the IASB agreed on the effective date of the new standard and cleared five sweep issues identified during the drafting process. Relevant dates. * Apply coupon code COMBO200 at checkout to receive $200 off the combined purchase price. • Negotiate to add the right to use an additional asset • Negotiate to increase the lease term • Negotiate to terminate the lease • Negotiate to change the consideration View all. Recognition of lease income. provides an overview of the IASB discussions of the leases project in October 2015. Modifications is a particular area which has raised issues and the devil is in the detail. Lease modifications 10 Final thoughts 11 Contents . Finally, IFRS 16 contains additional application guidance on how to deal with periods covered by options to extend or terminate a lease. While IFRS 16 is not a large standard in terms of pages when compared to other more recent standards, it is a standard that is raising many practical and interpretational issues. date of the lease modification. This publication offers guidance on accounting under IFRS 16 for common forms of lease modifications. * For more information, call 201-505-6062 or email us-kpmglearning@kpmg.com. According to IFRS 16, lease modification is a change in either scope or payments for the lease that was not part of the original conditions. to IFRS 16 to simplify how lessees account for rent concessions. KPMG addresses how to account for rent concessions resulting from these events under ASC 842 as a lessee or a lessor. Related content. In depth s g t s k s s IFRS 16 implications for lessors in the real estate industry PwC 1 IFRS 16, ‘Leases’, will be effective for annual reporting periods beginning on or after 1 January 2019. KPMG reports on new SEC staff guidance on updating the foreign exchange rate used to remeasure an ROU asset into the lessee’s functional currency. If the lessee decides to apply this exemption each lease component and any associated non-lease component is accounted for as a single lease component. 2020 AICPA Conference on Current SEC & PCAOB Developments . And the impact of the COVID-19 coronavirus pandemic has meant that landlords have been dealing with unprecedented levels of defaults, rent concessions and other lease modifications. 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