Lease accounting Journal entries for Modification
Details for lease accounting with modification
When the lease is modified without any increase in the scope of the lease then lease liability and the right-of-use are recomputed on the effective date of such modification. This would result in amortising an additional amount and the finance charges based on the revised lease liability should be recomputed.
Let us assume the following details for lease accounting:
Lease start date: 1-Apr-2019
Lease end date: 31-Mar-2024
Lease payments: Rs. 2,75,000
Lease Deposit: Rs. 3,00,000
Payment frequency: Annual – payable at the end
Incremental borrowing rate: 9%
Lease modification:
Lease Modification effective date: 1-Apr-2020
Lease payments: Rs. 3,25,000
Right-of-use
Recognition of Lease liability
Impact of Lease modification:
Amortisation of Right-of-use
Finance cost
Impact of lease modification:
Interest free deposit
Imputed interest income
Amortisation of Right-of-use
Trial balance
Profit and Loss Account
Balance Sheet
