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.
Definition
A lease modification is a change to the contractual terms that adds or terminates the right to use one or more underlying assets, or extends or shortens the contractual lease term, at a price that reflects market terms. Depending on the nature of the modification, it is either treated as a new separate lease or as a change to the existing lease — in which case the lease liability and right-of-use asset are remeasured at the effective date of the modification.
Why it matters
Lease modifications are a common event in the life of a lease — particularly for property leases where rent is renegotiated, space is added or reduced, or lease terms are extended. Getting the accounting right at modification date is important for accurate balance sheet reporting.
In AuditLease
AuditLease tracks lease modifications and preserves historical calculation runs so the impact of each modification is clearly evidenced and traceable.
Related terms
Official sources
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence, so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.