If a lease is renewed, modified, or renegotiated, proper accounting for leases becomes more complex. Remember that changes in the rents based on provisions in the original lease agreement (for example, due to changes in sales volume or the consumer price index) are considered contingent rentals/variable lease payments and, except for IFRS 16 accounting, do not result in changes to the primary lease data record in EZLease, though they can be entered for tracking on the Variable tab. (See Minimum Lease Payments.) For IFRS 16, however, changes in rent due to an index or rate (such as the consumer price index or LIBOR) do require modifying the lease and are considered part of the lease payments.
EZLease makes accounting for lease modifications simple. When you make a change to a financial field on the lease (begin or end date of the lease, rent steps, guaranteed residual, etc.) and choose “Revise” while saving the lease, EZLease creates a “revision.” The prior information for the lease is maintained, both for audit purposes and so that the activity up to the present is properly recorded in future reports. The modified information for the lease is stored in the new revision, taking effect on the revision booking date. Balance sheet accounts are adjusted to reflect the new terms, and the lease continues with the new values.