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IFRS 16 Lease Term

IFRS 16 Lease Term

Saket Modi

20 years: Chartered accountant & educator

The lease term is the non-cancellable period. In this video, Saket outlines different circumstances which may affect the original estimated lease period.

Accounting Fundamentals

Competent

The lease term is the non-cancellable period. In this video, Saket outlines different circumstances which may affect the original estimated lease period.

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IFRS 16 Lease Term

1 min 4 secs

Overview

The lease term is the non-cancellable period. In this video, Saket outlines the economic incentives for the lessee to exercise, or not exercise the option. This may include the T&Cs for optional periods. The lease term may need to be reassessed at a later date due to changes in the circumstances which may affect the original estimated lease period.

Key learning objectives:

  • What is the lease term?

  • What are the reasons for the lessee to exercise the option?

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Summary

What is the lease term?

The lease term is the non-cancellable period together with both:

  • Periods covered by an option to extend the lease, if lessee is reasonably certain to exercise that option
  • Periods covered by an option to terminate the lease, if lessee is reasonably certain not to exercise that option

What are the reasons for the lessee to exercise the option?

  • Terms and conditions for optional periods compared with market rates
  • Costs relating to termination of the lease or importance of underlying asset to lessee’s operations

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Saket Modi

Saket Modi

Saket is a financial trainer and consultant based out of London. He specialises in advanced accounting, financial reporting and financial analysis, particularly with regards to International Financial Reporting Standards (IFRS), International Public Sector Accounting Standards (IPSAS) and Financial instruments.

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