Handle a lease modification?
So what is a lease modification? “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. A lease modification includes adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term.”
A lease modification is triggered when you change certain terms of a lease. There are a few common examples of lease modifications, they include:
- A lease extension
- Early termination of the lease
- A change in the timing of lease payments
- Leasing additional space in the same building
To begin the lease modification process, select the lease that is being modified from the lease ListView. For this example we will be using the Headquarters - Federal trust Lease
Click on the Lease selection to display the General Lease data
When the lease data is displayed, set the Lease Status to "Inactive"
Click on the CopyLease button as shown below by the red arrow
Click on the Copy Lease Information button. This will create a duplicate of the data in the current lease.
Go back to the Lease ListView and the copy of the lease will be displayed as "Copy of ...". Click into this lease to start making the modification changes.
Change the name of the lease, change the Inception Date and Commencement Date to the "Modification Date" and any other modification changes that are necessary.
The amortization schedule (ROU Asset and Lease Liabilities) for the modified lease will now be calculated based on the on the modification date and any other modifications that were made.
Other Notes
- You should discuss whether a modification is required with your auditor.
- Additional details can be found in the iLeasePro ASC 842 Lease Accounting Assumptions and Inputs Help Guide
- Remember to add this new lease to any Groups, if appropriate.