Lease Modifications (IFRS 16)
Related terms
Category
IFRS 16
Under IFRS 16, a lease modification is a change in the scope or consideration of a lease that was not part of the original terms, such as adding space, extending the term, or changing the payment amount. IFRS 16 requires the lessee to determine whether the modification is a separate lease or a modification of the existing lease.
Why it matters
IFRS 16 modification accounting has a critical fork: if the modification grants an additional right of use at a commensurate price, it is treated as a separate new lease. Otherwise, the existing lease is remeasured. The remeasurement uses a revised discount rate for scope changes and the original rate for consideration-only changes. This is different from ASC 842's modification framework, which uses a different decision tree, creating divergence for dual-reporters.
How Arvexi handles this
Arvexi applies the IFRS 16 modification decision tree automatically. The platform evaluates whether the modification qualifies as a separate lease, determines the appropriate discount rate, recalculates the lease liability and ROU asset, and generates the modification journal entries. For organizations reporting under both ASC 842 and IFRS 16, modifications are processed in parallel under both standards.