Lease accounting Journal Entries for Modification

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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


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

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