If the scope of a lease is reduced, the portion of the lease that applies to the reduction is considered early terminated. “Reduction in scope” includes a reduction in the asset(s) being leased; for IFRS 16 and GASB 87, it also includes a reduction in the lease term.
For a partial termination, revise the lease with the new terms (including the reduced rent and any other adjustments). On the Additional Data tab, at the bottom, if the amount of asset leased is reduced, set the Underlying Asset Scope to Decreased. EZLease determines a reduction in lease term for IFRS and GASB 87 automatically. On the revision booking date, EZLease recognizes a reduction in asset and liability. For ASC 842 or GASB 87, you can either specify the remaining percentage amount of the right of use asset, or leave the percentage field blank to allow EZLease to calculate it as the same as the percentage remaining of the liability. You should choose one method or the other as an accounting policy election and use it consistently for all leases of the same class of underlying asset (such as all real estate leases or all vehicle leases). For IFRS 16, you are required to enter the remaining percentage of the asset. A gain or loss is recognized for the difference between the reductions in asset and liability.
If the discount rate changes at the time of revision, the percentage reduction in asset and the termination gain or loss are based on changes using the original discount rate. The change in liability due to the change in discount rate is matched by an adjustment to the asset.