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Lease modifications

Lease modifications

Accounting for changes to lease contracts

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Brian O'Donovan

Partner, IFRG

KPMG International

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Whatever the reason for the change, the resulting accounting can be complicated.

Accounting for changes to lease contracts

Lease modifications are very common. For example, a lessee with a struggling business may seek to negotiate lower lease payments or terminate some leases early. Or a lessor may wish to end a lease early so that it can redevelop or redeploy the underlying asset. 

Whatever the reason for the change, the resulting accounting can be complicated.

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.

Clarity and consistency

IFRS 16, the new leases standard, introduces detailed guidance on accounting for lease modifications for both lessee and lessor. 

This is good news, providing clarity and consistency in an area where there has been little guidance – and much diversity – in the past. 

You may need to act now

Many companies will need to address historical lease modifications now, as part of their transition project. 

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.

Find out more

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. We hope you will find it useful as you prepare to adopt the new standard in 2019.

Visit our IFRS – Leases hot topics page for more insight on lease accounting under IFRS.

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.

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