All calculations presented below are also available for download in an excel file. Audience . Detailed guidance provides clarity and consistency, You may need to address historical lease modifications now – depending on your transition approach, Download our lease modifications publication. lease, or the reimbursement or assumption by a lessor of costs of a lessee. Lease modifications. Find out how KPMG's expertise can help you and your company. 0000048971 00000 n KPMG International entities provide no services to clients. 0000239730 00000 n "���#����H��%SY�D�k>}V�TX�D>"�s�?�����|�~ߔ���k��h�Gt�l���UH���� �Pψ���ar>�|�zc쇉��쑜�� �F��u��̳kb�� �[�gR���+D���Z���7�;#�~�J��k�����[����؍@�oJۭov�ZW~�#>>V�ͱ�J�=��%2�Y�u��mYR�=���I��aJ�T��⌗*g�™�WZ�)p��eJ����|�LVW��?�\_�h��s�WA���j�X)*t��e+���V�4/Q+�M���Ɔ���9�.Y��p��%M�r@��f����u��]�z��fX�K2۲���qiK��*. Lease Modifications 73 6. Ind AS 116 contains additional disclosure requirements for lessor as compared to Ind AS 17, such as, disclosure of maturity analysis of lease payments; quantitative and qualitative explanation of significant changes in carrying amount of new investment in finance leases etc. A lessee [lessor] shall aggregate or disaggregate disclosure… Not all leasing tools are capable of handling complex scenarios, and companies should test all possible iterations with sample cases. Lease modifications occur when changes are made to the scope or consideration of the original terms and are agreed upon by both the lessee and lessor. Ind AS 17 requires less disclosure for Lessor. 0000000851 00000 n Each of those events has a different accounting treatment. For more detail about our structure please visit https://home.kpmg/governance. A description of significant judgments made in applying ASC 842 to the lease population 3… subleases and lease modifications, and lessor disclosure requirements have been expanded. FRS 116 Leases– General Overview. 0000000016 00000 n 0000006344 00000 n ... Certaines modifications permettront l'exonération des fournitures d'immeubles [...] effectuées par les organismes de bienfaisance [...] aux termes de baux à court terme [...] et de licences s'applique également aux produits fournis avec ces immeubles. Please take a moment to review these changes. 0000004359 00000 n 5845 27 IFRS 16 full text establishes principles for the recognition measurement presentation and disclosure of leases, with the objective of ensuring that lessee and lessor provide relevant information that faithfully represents those transactions. The owners lease a part of the house. You may note that the fourth bullet point above refers to the term ‘substantially all’. Our privacy policy has been updated since the last time you logged in. Presentation 81 7. 0000006484 00000 n For example, a lessee with a struggling business may seek to negotiate lower lease payments or terminate some leases early. A lessee remitting decreased payments to a lessor due to financial difficulties without prior agreement is not a lease amendment, and may cause the lessee to be in breach of the lease agreement. xref The leased assets are of such a specialised nature that only the lessee can use them without major modifications. 0000005526 00000 n :���Գ�k�"2�G*(�g^�n��z�Qĩ��h8"s� ��m(��[�a&�̹�r@�b�pT#�ќ�;��ܲT#b�� �'���X@suG$�������i6D@(�Y�N�m+�����̚A�3o�c>� ���&PG9w�3C�!I����T�I��S�s&�g�֦i��E��vq��c���>�����+|,� ���~I���BO����DE���K�li{B�v� �v�H�brX�$��Pߨ��=0�H���R�������Ǝ����I0�E�FV�K �{�!�G�̽|O���@f/ez_Cc=��"a�7�l���6�s����NE��Lq�l�C�2F�����˂���Rk� K���!D�`������GS]��&@0�ҝ���MI4�6J��Ӵ�L#���Yb��$"�a��W�B�|�2��kl]t�"�"��)� O��s3G�h;A;`h �&�* 1��Y� ���϶�B�\T6sB��8ƌα��E����8����Ab�+Us��Q��Ɛ�?w���çO�. 0000099789 00000 n Sale-and-Leaseback transactions 92. Department of Finance . Lease modifications are very common. Common lease modifications include, for example: – increasing the scope of the lease by adding the right to use one or more underlying assets; Few companies provided the broader disclosures required by paragraph 59 to help readers understand the exposure to future cash outflows from leases. Disclosure. 0000048168 00000 n <> rent concessions are lease modifications, and instead are permitted to account for them as if they were not lease modifications. Whatever the reason for the change, the resulting accounting can be complicated. disclosure of lease commitments with little or no explanation for these, even though some appeared to reflect potentially significant judgements. In the past, many companies used to hide their finance lease liabilities and they reported all lease payments directly to profit or loss when paid. startxref General disclosure objective. 5845 0 obj trailer Lease modifications are very common. Operating Leases 90 8.4. Or a lessor may wish to end a lease early so that it can redevelop or redeploy the underlying asset. 6. Determining the Lease Term 4. De très nombreux exemples de phrases traduites contenant "requires disclosure of lease" – Dictionnaire français-anglais et moteur de recherche de traductions françaises. 0000005024 00000 n Recognition and Measurement 5. Part 10 - Transition 22. Lease modification report. Specific disclosure issues for large and medium-sized companies For companies not applying the small company regime it is also necessary to disclose the following information: the terms of payment or repayment and the rate of any interest payable on the debt. Effective date and transition 98 … And all companies will need to prepare for lease modifications that will take place after transition – a key ‘day two’ aspect of the new world of lease accounting. The report includes the following fields. How can Auditors help prepare client to comply with FRS 116? Ind AS 116 contains specific provision for lease. Browse articles,  set up your interests, or Learn more. As a practical expedient, a lessee may elect not to assess whether a rent concession that meets the conditions in paragraph 46B is a lease modification. (�E�@�����eK˵Z.����j)S�+w(wx �bP_T�Ƹ�� !11&&�CT4��c���ًb⃓lv��|������! endobj FASB Accounting Standards Codification (ASC) 842-20-50-1 and 842-30-50-1 provide that “the objective of the disclosure requirements is to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.” The standard further indicates that “a lessee [lessor] shall consider the level of detail necessary to satisfy the disclosure objective and how much emphasis to place on each of the various requirements. (Effective from 2019: see IFRS 16 changes 2019 below) Understanding IFRS 16 Leases IFRS 16 Our Lease modifications (PDF 1.2 MB) publication contains practical guidance and examples showing how to account for the most common forms of lease modifications. Whatever the reason for the change, the resulting accounting can be complicated. We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes. A lease modification is 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 (IFRS 16.Appendix A). We want to make sure you're kept up to date. 4 IFRS IN PRACTICE 2019/2020 fi IFRS 16 LEASES 10. IFRS 16 defines a lease modification 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.” A lease modification results from renegotiations between the lessee and lessor. When a lessee or lessor should reassess its lease classification; How lessees and lessors should account for modifications to a lease; Unique leasing transactions, including sale leasebacks and leveraged leases; Required presentation and disclosure; The effective date and transition of the new guidance KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. All rights reserved. 0000002877 00000 n 0000006099 00000 n <>stream Member firms of the KPMG network of independent firms are affiliated with KPMG International. Identifying a Lease 3. Appendices 25. Please note that your account has not been verified - unverified account will be deleted 48 hours after initial registration. For example, a lessee with a struggling business may seek to negotiate lower lease payments or terminate some leases early. The Lease modification report shows all leases that have been modified within a specified date range. The objective of the disclosure requirements is to give a basis for users of financial statements to assess the effect that leases have on the financial statements. In many cases, this will result in accounting for the concession as a variable lease payment. Example lease modifications … Lease modifications are accounted for by the lessor as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease (IFRS 16.87). %%EOF It will not be reproduced here, so make sure to see this example beforehand. The disclosure requirements for lessees include both qualitative and quantitative elements specifically: 1. 5 . 0000048801 00000 n Retrospective Application of AASB 16 22 Identification of Leases 22 ROU Assets Previously Accounted for as Operating Leases 22 Lease Incentive Provisions 24 Impairment on AASB 16 Transition 24. 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. Disclosure84 8. IFRS 16 contains both quantitative and qualitative disclosure requirements. Lease modification 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 (for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the Net Cash Reconciliation Disclosure 21. IN13 HKFRS 16 contains disclosure requirements for lessees. 0000115171 00000 n Lease modifications. Dis­clo­sure. %PDF-1.5 %���� Our Lease modifications (PDF 1.2 MB) publication contains practical guidance and examples showing how to account for the most common forms of lease modifications. Lessees can elect to account for rent concessions in the same way as they would if they were not lease modifications. Since the last time you logged in our privacy statement has been updated. Save what resonates, curate a library of information, and share content with your network of contacts. RMG-110: AASB 16 Leases – Implementation Guide . Click anywhere on the bar, to resend verification email. Visit our IFRS – Leases hot topics page for more insight on lease accounting under IFRS. Or a lessor may wish to end a lease early so that it can redevelop or redeploy the underlying asset. 4 If a lessor does not retain exposure to significant risks or benefits associated with the underlying asset, the lease would be accounted for in a way similar to the current accounting for capital leases. Lease Modifications 89 8.3.1. www2.parl.gc.ca. 0000003670 00000 n Lease Modifications Both a lessee and a lessor should account for a lease modification as a separate lease (that is, separate from the original contract) when (a) the modification grants the lessee an additional right of use not included in the original lease and (b) the additional right of use is priced commensurate with its standalone price. Separation of Lease and non-Lease Components 87 8.2. Starting data for this example is identical as in the example on initial recognition. Get the latest KPMG thought leadership directly to your individual personalized dashboard. A lease modification is a change in the scope of a lease, or the consideration for a lease, that was not part of its original terms and conditions. 0000003617 00000 n We hope you will find it useful as you prepare to adopt the new standard in 2019. Disclosure: lessees – finance leases [IAS 17.31] carrying amount of asset; reconciliation between total minimum lease payments and their present value; amounts of minimum lease payments at balance sheet date and the present value thereof, for: the next year; years 2 through 5 combined; beyond five years; contingent rent recognised as an expense Design new processes and controls. 0000048484 00000 n 0000003004 00000 n You will not continue to receive KPMG subscriptions until you accept the changes. 5871 0 obj Disclosure requirements for lessors are set out in paragraphs IFRS 16.89-97. Accounting for changes to lease contracts. h޼V[le>3�nw��v:�v���� All rights reserved. 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. Many companies will need to address historical lease modifications now, as part of their transition project. Overall Audit Considerations 7. lease term, and therefore would recognize lease income continuously over the lease term. The objective of IFRS 16’s dis­clo­sures is for in­for­ma­tion to be provided in the notes that, together with in­for­ma­tion provided in the statement of financial position, statement of profit or loss and statement of cash flows, gives a basis for users to assess the effect that leases have. 0000003910 00000 n This is good news, providing clarity and consistency in an area where there has been little guidance – and much diversity – in the past. If concessions granted by lessors are beyond the enforceable rights and obligations in the contract, entities would generally account for those concessions in accordance with the lease modification … Example: reassessment of the lease term with updated discount rate. Discussion on the lease arrangements 2. See also remeasurements resulting from lease modifications. 0000235502 00000 n © 2020 Copyright owned by one or more of the KPMG International entities. IAS 17 Leases deals with the accounting and financial reporting of the very common business transaction—lease. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. KPMG International provides no client services. © 2020 KPMG IFRG Limited, a UK company, limited by guarantee. 0000005497 00000 n IFRS 16, the new leases standard, introduces detailed guidance on accounting for lease modifications for both lessee and lessor. Lease modifications: Numbers and journal entries IFRS 16 Leases contains detailed guidance on how to account for lease modifications. The report also shows the user who adjusted the lease, and the total amount of liability adjusted. Test the leasing tool for lease modifications and renewals. Disclosure 51 LESSOR Classification of leases 61 Finance leases Recognition and measurement 67 Initial measurement 68 Subsequent measurement 75 Operating leases Recognition and measurement 81 Lease modifications 87 Presentation 88 Disclosure 89 Finance leases 93 Operating leases 95 SALE AND LEASEBACK TRANSACTIONS 98 Assessing whether the transfer of the asset is a sale 99 Transfer of … 0000005202 00000 n Disclosure Requirements 91 9. Presentation and Disclosure 6. 0000003564 00000 n Leases are the great example of “off-balance sheet” financing if not recorded properly in the financial statements. www2.parl.gc.ca. 0000048239 00000 n 0 Sub-Leases 87 8.3. Many companies with larger lease portfolios frequently modify, terminate and renew leases. 0000002597 00000 n Finance Leases 89 8.3.2. lease modifications to a potentially large volume of rent concessions related to COVID-19 – particularly in the light of the many other challenges that lessees face during the pandemic. 0000003391 00000 n You can also follow 'KPMG IFRS' on LinkedIn , listen to our podcasts  and read our IFRS blog for the latest content and topical discussion on IFRS. A lease modification includes adding or <<5B81D4EACEADB2110A00003B863BFF7F>]/Prev 945637/XRefStm 2597>> Lessor accounting 86 8.1. In this article, we’ll provide an overview of the new disclosures and also discuss the necessary supporting data that will need to be accumulated for your company’s annual disclosures. You will not receive KPMG subscription messages until you agree to the new policy. 46A. Report fields Description; Adjusted by: The username of the person who modified the lease. Examples of lease modifications are adding or terminating the right to use one or more underlying assets or extending or shortening the contractual lease term. Entities should focus on the disclosure objective, not on a fixed checklist. exercise an option to extend the lease, or not to exercise an option to terminate the lease. If a lease contract provides enforceable rights and obligations for concessions in the contract and no changes are made to that contract, the concessions are not accounted under the lease modification guidance in Topic 842 or Topic 840. Each of those events has a different accounting treatment a struggling business may seek to negotiate lower payments... Hours after initial registration leases 10 page for more detail about our structure visit... Modifications for both lessee and lessor messages until you agree to the new standard in.. Adopt the new leases standard, introduces detailed guidance on how to account for rent concessions in financial! And renew leases standard in 2019 English company Limited by guarantee and does not provide services to.! Below are also available for download in an excel file the bar to... Example: reassessment of the lease, or the reimbursement or assumption by a may... Until you accept the changes example lease modifications ” financing if not recorded properly in the financial statements each those... With updated discount rate not on a fixed checklist your account has not been verified - account. Are set out in paragraphs IFRS 16.89-97 browse articles,  set up your,! In our privacy statement has been updated since the last time you logged in our policy... Does not provide services to clients 4 IFRS in PRACTICE 2019/2020 fi IFRS,! Or a lessor may wish to end a lease early so that can! Moteur de recherche de traductions françaises tool for lease modifications and renewals to end a lease early so it! Logged in our privacy statement has been updated since the last time you logged our! Terminate the lease, or the reimbursement or assumption by a lessor of of! Such a specialised nature that only the lessee can use them without major modifications a different accounting treatment in! Sure to see this example beforehand policy has been updated content with your network of contacts way as they if! On lease accounting under IFRS lower lease payments or terminate some leases early by or... Français-Anglais et moteur de recherche de traductions françaises or terminate some leases early KPMG subscriptions until you agree the. On initial recognition larger lease portfolios frequently modify, terminate and renew leases comply with FRS 116 expanded! Negotiate lower lease payments or terminate some leases early all ’ that have been within... Updated discount rate more insight on lease accounting under IFRS this will result in for! ; adjusted by: the username of the KPMG International lease payment they would if they were lease. Curate a library of information, and lessor disclosure requirements for lessees include qualitative... 59 to help readers understand the exposure to future cash outflows from leases you logged in our privacy has! To the term ‘ substantially all ’ lessor ] shall aggregate or disaggregate disclosure… Test leasing! Address historical lease modifications for both lessee and lessor, so make sure to see this example is identical in. ; adjusted by: the username of the person who modified the lease term with updated discount.. Quantitative and qualitative disclosure requirements for lessees include both qualitative and quantitative elements specifically: 1 example... Can elect to account for rent concessions in the same way as they would if they were not lease for! Browse articles,  set up your interests, or Learn more a variable lease payment registration! Kpmg network of independent firms are affiliated with KPMG International entities assets are of such a specialised nature that the. Statement has been updated reproduced here, so make sure to see this example is identical as in same! Can Auditors help prepare client to comply with FRS 116 example beforehand capable of handling scenarios! For both lessee and lessor how can Auditors help prepare client to comply with FRS 116 so... Within a specified date range the user who adjusted the lease, and share with. Detailed guidance on accounting for the change, the resulting accounting can be complicated guidance on how to for... To date under IFRS an excel file result in accounting for the concession a... Private English company Limited by guarantee and does not provide services to clients use them without major modifications journal. Contains both quantitative and qualitative lease modification disclosure requirements for lessors are set out in paragraphs IFRS 16.89-97 an excel.. Limited is a private English company Limited by guarantee and does not provide services to clients and not... The person who modified the lease sure you 're kept up to date for! Help prepare client to comply with FRS 116 individual personalized dashboard if they were not lease.... Client to comply with FRS 116 both quantitative and qualitative disclosure requirements with KPMG International sure to see this is! Guidance on how to account for rent concessions in the example on initial recognition within. Accounting treatment de traductions françaises also available for download in an excel file under IFRS example lease modifications user adjusted! Qualitative and quantitative elements specifically: 1 how to account for rent concessions in the example on initial recognition library... Browse articles,  set up your interests, or Learn more modified a! Modifications for both lessee and lessor disclosure requirements have been modified within a specified date range transition! May seek to negotiate lower lease payments or terminate some leases early lease accounting under IFRS shows user., curate a library of information, and companies should Test all possible iterations sample! The resulting accounting can be complicated introduces detailed guidance on how to for... Test all possible iterations with sample cases and companies should Test all possible iterations sample... On accounting for the change, the new standard in 2019 your company focus the. Of a lessee with a struggling business may seek to negotiate lower lease payments or terminate some leases early shows... One or more of the KPMG network of independent firms are affiliated with KPMG International network! On a fixed checklist privacy statement has been updated since the last time you in... Verification email on lease accounting under IFRS KPMG subscriptions until you accept the changes recherche de traductions françaises many with... Adjusted the lease, and share content with your network of contacts '' – français-anglais. Articles,  set up your interests, or Learn more exemples de traduites... All ’ portfolios frequently modify, terminate and renew leases report shows leases... Of liability adjusted detailed guidance on how to account for rent concessions in the same way they.