Lease term
The non-cancellable period of a lease, plus optional extension or termination periods where exercise is reasonably certain.
Definition
The lease term used for accounting purposes is the non-cancellable period plus any optional renewal periods that the lessee is reasonably certain to exercise, and any optional termination periods that the lessee is reasonably certain not to exercise. This assessment is a judgement and must be documented, and reassessed on a significant event or significant change in circumstances within the control of the lessee.
Why it matters
The lease term directly affects the total lease payments used to calculate the lease liability and ROU asset. A longer assumed lease term produces a larger liability. Auditors expect clear documented rationale for lease term judgements.
In AuditLease
AuditLease stores the lease term for each contract and lets the user document renewal option and termination option judgements; the create form asks for the rationale when an option is selected. The statutory accounts note counts the leases with a recorded rationale and shows one representative rationale.
Related terms
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.