Regulate Highlight Lease For Free

If the lease meets any of the criteria, then it must be recorded as a finance lease. The five criteria relates to a bargain purchase option, transfer of ownership, net present value of lease payments, economic life, and whether the asset is specialized.

Per ASC 842-10-25-8, an entity shall account for a modification to a contract as a separate contract (that is, separate from the original contract) when both of the following conditions are present: The modification grants the lessee an additional right-of-use not included in the original lease.

When the leased asset is disposed of, the fixed asset is credited and the accumulated depreciation account is debited for the remaining balances. Financial Accounting Standards Board. "FASB Accounting Standards Update No. 2016-02 Leases (Topic 842)," Page 87.

Reassessment of the lease after the commencement date is required by a lessee if there is a change in the lease term, or on lessee's assessment of whether it would reasonably be certain to exercise a purchase option.

Reassessments are required when an event does not involve renegotiating the lease terms and conditions, but when facts, assumptions, or other circumstances change. For example, a lessee may change their decision about exercising an option within a lease.

IFRS 16 Leases contains detailed guidance on how to account for lease modifications. 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.

Reassessments are required when an event does not involve renegotiating the lease terms and conditions, but when facts, assumptions, or other circumstances change. For example, a lessee may change their decision about exercising an option within a lease.