Lease modification
A qualifying increase in scope at a commensurate stand-alone price is accounted for as a separate lease. Otherwise, the lessee applies the modification requirements, including remeasuring the lease liability and adjusting the right-of-use asset; a decrease in scope can require recognition of a gain or loss. Distinguish a modification from reassessment under existing terms.
Worked example
A lessee adds an extra floor to a building lease at a price commensurate with its stand-alone price. If both conditions are satisfied, the additional right is accounted for as a separate lease.
Common mistake
Calling the exercise of an existing option a modification without examining the original terms, or always treating an increase in scope as a separate lease.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBR | Direct | September 2026–June 2027 |