Reasonably certain
The threshold used to assess whether an option will be exercised — a higher hurdle than "more likely than not".
Definition
"Reasonably certain" is the standard used under IFRS 16 and amended FRS 102 to assess whether a lessee will exercise a renewal, purchase, or termination option. It is higher than "more likely than not" — there should be a significant economic incentive to exercise the option. This judgement must be documented, assessed at commencement, and updated when facts change.
Why it matters
"Reasonably certain" is one of the most important judgements in lease accounting. Getting it wrong changes the lease term, the discount rate applied, and the resulting lease liability. Auditors pay close attention to how this threshold is applied.
In AuditLease
AuditLease captures reasonably certain assessments for each option on every lease and includes them in the statutory accounts note key judgements section.
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.