ShareControl IFRS 16 feature
Lease modifications and reassessments in ShareControl IFRS 16
When a lease changes, the entity must assess whether it is a modification, a reassessment or another adjustment that affects the IFRS 16 calculations. ShareControl IFRS 16 makes it easier to register the change, calculate its effect and document the basis.
Basis
What is a lease modification?
A lease modification is a change in the scope of, or the consideration for, an existing lease that was not part of the original terms and conditions. Other changes, such as a revised assessment of the lease term or an option that already follows from the contract, may be a reassessment under IFRS 16.
Extension or shortening of the lease term
Change in lease payments
Addition or reduction of space
Partial or full termination
Changes that require remeasurement of the lease liability
How it works
How lease modifications work in ShareControl IFRS 16
ShareControl IFRS 16 keeps lease data, calculations, postings and documentation in the same solution. When a modification or reassessment is registered, the system can update the calculation basis and show how the change affects IFRS 16 reporting.
1
Find the lease to be changed and open the lease details.
2
Specify whether the change is a modification, a reassessment, an index adjustment or a termination.
3
The system updates the payment schedule, present value, lease liability and amortisation schedule.
4
History, calculations and change postings are stored for reporting and audit.
What our customers say
Why our customers like ShareControl IFRS 16
Our collaboration has meant that we in Aker Solutions together with Share Control got a system that works very well. Where Share Control has arrived at a technical solution and contributed specialist knowledge. We have had good professional discussions with Share Control.
What sets Share Control apart from other suppliers is that they know IFRS 16. Aker Solutions in turn contributed the user perspective. The solution is simple, intuitive and flexible, and you can always see where the data comes from.
– Per Øyvind Reneflot, Senior Advisor
Aker Solutions
“It is noticeable that Share Control’s IFRS 16 solution was developed by auditors who have thought about the Audit trail”.
– Elisabeth Croce, responsible for internal audit and Business Controller
Frösunda
Registration
Register the change directly on the lease
The modification should not sit in a separate spreadsheet next to the lease. In ShareControl, the change is registered directly on the relevant lease, so calculations, postings and documentation stay connected.
Date of change
Type of change: modification, reassessment, index adjustment or termination
Revised lease term
Revised payments
New discount rate where required
Comments and documentation
Calculations
Automatic update of the IFRS 16 calculations
Once the modification or reassessment is registered, the relevant IFRS 16 calculations are updated. This reduces the need for manual workings and makes it easier to use the same figures for accounting, reporting, reconciliation and audit.
Lease liability
Right-of-use asset
Future payments
Interest expense
Depreciation
Amortisation schedule
Change postings
Journal entries
Change postings to the accounts
A modification or reassessment does not stop at the calculation. The change must also be reflected in the accounts. ShareControl IFRS 16 can deliver the change postings as an accounting journal or as the basis for an ERP integration.
Updated lease liability
Adjustment of the right-of-use asset
Revised interest expense
Revised depreciation
Accounting journal as standard
Direct ERP integration as an add-on
Index and options
Handle index adjustments and exercised options
Reassessments can arise when options are exercised, the lease term is reassessed or payments are index-adjusted. In ShareControl, you register the change on the lease and can add a comment on what has been done.
Exercise of options
Reassessment of the lease term
Index adjustment of lease payments
Variable payments that affect the measurement
Documentation
Documentation and audit trail
In an audit, having the right figure is not enough. The finance team must also be able to show how the figure came about. ShareControl keeps the history so that modifications, reassessments and their effect on the calculations can be explained and documented.
What was changed
Whether the change was a modification or a reassessment
When the change was registered
Who registered the change
How the change affected IFRS 16 reporting
Handle lease modifications and reassessments with less manual work
See how ShareControl IFRS 16 makes it easier to calculate, post, document and follow up changes to leases.
IFRS 16-assessment
Modification or reassessment?
IFRS 16 distinguishes between lease modifications and reassessments. The distinction matters because they can be accounted for differently. ShareControl IFRS 16 helps the finance team document which type of change has been registered and how it affects the calculations.
| Type of change | Example | What ShareControl IFRS 16 does |
|---|---|---|
| Lease modification | Renegotiated price or revised payment terms | Remeasures the lease liability and the right-of-use asset |
| Lease modification | Addition of a new underlying asset | Assesses whether the change is accounted for as a separate lease |
| Lease modification | Increase or decrease in leased space | Updates the scope and the calculation basis |
| Lease modification | Partial or full termination | Adjusts the remaining liability and asset, and recognises a gain or loss in profit or loss |
| Reassessment | Exercise of an option or revised assessment of the lease term | Remeasures the lease liability using a revised discount rate |
| Reassessment | Index adjustment of lease payments | Updates future payments using the original discount rate |
| Reassessment | Changes in variable payments included in the measurement | Updates the payment schedule and the calculation |
When?
When must the IFRS 16 calculation be updated?
Not all changes are treated the same way. The finance team must therefore be able to document what has changed, which assessment has been made and how the calculation has been updated.
| Change | Example | What ShareControl IFRS 16 does |
|---|---|---|
| Revised lease term | The lease is extended by three years | Recalculates the lease liability using a revised rate |
| Revised payments | Rent is renegotiated or index-adjusted | Updates the payment schedule and present value |
| Revised scope | More or fewer premises are included | Adjusts the right-of-use asset and the liability |
| New discount rate | The modification or reassessment requires a new rate | Updates interest and balance sheet values |
