KPMG reports on the … 15 mins; Online tutorial; In this topic we be look at the lease modifications for lessees. Related content. $300,000: 12 years. PwC’s Leases guide is a comprehensive resource for lessees and lessors to account for leases under the new leases standard (ASC 842). 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. Applicability. Q4 2020 Quarterly Outlook. 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. Some industries were hit harder by the pandemic than others. 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. Financial Reporting Developments - Lease accounting - Accounting Standards Codification 842, Leases. * For more information, call 201-505-6062 or email us-kpmglearning@kpmg.com. This webinar, hosted by KPMG Partner Patricia Stebbens, … 8 Lease modifications 40. Example 1 . Accounting for the modification: Remeasure lease liability: $1,100,000 10.1 Data extraction challenges 49 10.2 Key transition decisions for tenants 50 10.3 Sale-and-leaseback on transition 53. So the service component will either be separated or the entire contract will be treated as a lease. Relevant dates. 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. Subscribe to our IFRS Perspectives Newsletter . provides an overview of the IASB discussions of the leases project in October 2015. 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. Filed under: Leases. b) Otherwise, the lessor should apply the requirements of Ind AS 109, Financial Instruments. Operating lease. Volume Discount! IASB ® Board project Phase I: pre-IBOR reform issues. • 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 to IFRS 16 to simplify how lessees account for rent concessions. 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. Lease modifications 10 Final thoughts 11 Contents . IFRS Newsletter: Leases. This publication offers guidance on accounting under IFRS 16 for common forms of lease modifications. 9 Sale-and-leaseback 46 10 Transition considerations 49. KPMG's new publication will help companies understand accounting under IFRS 16 for common forms of lease modifications. KPMG addresses how to account for rent concessions resulting from these events under ASC 842 as a lessee or a lessor. KPMG Executive Education. The IASB Board has a two-phase project to assist in a smoother transition away from IBOR. Lease modifications may also prompt remeasurement of the lease liability unless they are to be treated as separate leases. To support the new recognition and measurement requirements, changes to information technology systems and data gathering processes may be required. CPE seminars … Learn more. ROUA: $200,000. date of the lease modification. Subscribe. [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. * Apply coupon code COMBO200 at checkout to receive $200 off the combined purchase price. 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. Finance leases: initial recognition and measurement Summary of the initial recognition and measurement. We are releasing our in-depth application guidance on IFRS 16 Leases in manageable chunks, one chapter at a time. Secondly, the length of the lease term determines whether a lease qualifies for the short-term lease exemption. Read more. Changes in estimates or circumstances do not give rise to a new classification of a lease (IFRS 16.66). Publications Financial Reporting Developments. Finally, IFRS 16 contains additional application guidance on how to deal with periods covered by options to extend or terminate a lease. lease components (services) from lease components. Link copied Overview. 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. View all. The accounting for lease modifications can be complex. From the reference library. Y% Difference: Lease liability. This guide was fully updated in October 2020. We provide detailed Q&As, examples and observations, as well as comparisons to legacy US GAAP, updated for continuing developments in practice. 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. 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. All other lease modifications. Digital Self-Studies. 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. 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. Individuals who register for any 2 KPMG Executive Education virtual seminars can save! Recognition of lease income. For example, the lessee may be required to recalculate lease liabilities using a revised discount rate and adjust right-of-use assets. Modifications is a particular area which has raised issues and the devil is in the detail. Patricia Stebbens KPMG Australia Michael Voogt KPMG Australia Also on home.kpmg. Lease modifications: Numbers and journal entries IFRS 16 Leases contains detailed guidance on how to account for lease modifications. 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. $1,100,000: $800,000. Guidance for lessors remains substantially unchanged from IAS 17. Lease classification is reassessed only if there is a lease modification. 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. Discounts Available for Groups of 3 or More! 2020 AICPA Conference on Current SEC & PCAOB Developments . Lessees and lessors receiving rent concessions resulting from coronavirus (COVID-19), the civil unrest in Hong Kong and other unforeseen events. The new standard could also impact entities beyond accounting, as discussed on the next … The increase in liability of $291,000 is adjusted against the ROU asset, resulting in a ROU asset of $512,000. 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. 15 Dec 2020 PDF. 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. Meet the IFRS team . Topics Leases. Lease modifications for lessees. Share. PREPARING FOR 2019. KPMG’s global IFRS leasing standards leader. Modification of financial instruments and/or lease contracts to change the contractual benchmark rate may result in a reassessment of the existing contracts. Under the new standard, other accounting changes include accounting for sub-leases, lease modifications, and sale and leaseback arrangements. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. 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. 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. 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. This edition of . In-depth application guidance on the new leasing standard. Understand the impact of the new leases standard, ASC 842, read KPMG's overviews of the leases guidance. 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. Latest edition: In this handbook, KPMG explains the new leases standard (ASC 842) in detail. The International Accounting Standards Board (the Board) has issued amendments . Subject AccountingLink. 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. At the effective date of the modification, the lease liability is remeasured to include the lease payments for the extended period (2020 to 2025). Quarterly update from KPMG on accounting and financial reporting developments, including SEC matters and FASB activity. 1000. IAS 17 prescribes the accounting policies and disclosures applicable to leases, both for lessees and lessors. Lease modifications – ten comprehensive examples. Applicability. 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