Determine lease term by combining the non-cancellable period with reasonably certain renewal or termination options.
The move: start with enforceable rights, then test economic compulsion. The contract end date is only the first layer of lease term. Under IFRS 16, lease term includes the non-cancellable period and option periods when the lessee is reasonably certain to exercise a renewal, or reasonably certain not to exercise a termination right. Reasonably certain is a high threshold. It is not management preference, budget convenience, or a vague statement that the team expects to stay. It needs evidence. Useful evidence includes major leasehold improvements that would be abandoned, a location that is critical to revenue, below-market renewal rent, relocation…
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