Lease Modifications
Lease modifications are changes to lease terms after commencement. FRS 102.20.54-20.58 requires remeasurement of the lease liability when modifications occur, with specific rules about which discount rate to use.
What is a Lease Modification?
A lease modification is any change to the scope of a lease, or the consideration for a lease, that was not part of the original terms. Common modifications include payment changes, term extensions, and scope adjustments.
FRS 102 Reference: FRS 102.20.54
Types of Modifications
Lease102 supports all FRS 102 modification types:
| Type | Example | Rate Treatment |
|---|---|---|
| Index/Rate Adjustment | CPI-linked rent increase | Original rate retained |
| Term Extension | Adding years to the lease | Revised rate required |
| Term Reduction | Exercising break clause | Revised rate required |
| Scope Increase | Adding floor space | Revised rate required |
| Scope Decrease | Proportionate reduction | Original rate permitted |
| Payment Change | Renegotiated rent | Depends on circumstances |
Rate Selection Rules
FRS 102.20.58 specifies when the original discount rate may be retained versus when a revised rate is required:
FRS 102 Reference: FRS 102.20.55-20.58
Original Rate Retained
Index-linked payment changes (CPI, RPI adjustments) and market rent reviews affecting future payments always use the original discount rate.
Original Rate Permitted
Per FRS 102.20.58, you may use the original rate when: (1) additional consideration is insignificant, (2) proportionate scope reduction with corresponding payment decrease, or (3) consideration reduction without scope decrease.
Revised Rate Required
Term extensions/reductions, scope increases with additional payments, and other significant payment changes not tied to indices require a revised discount rate at the modification date.
Recording a Modification
To record a modification in Lease102: Open the lease, click the Modifications tab, click Add Modification, complete the form with effective date, type, description, and any rate changes, then save.
EAR Conversion
Modification History
All modifications are tracked chronologically with full audit trail. View the history in the Modifications tab to see each change, the rate used, and the impact on liability and asset values.
Deleting Modifications (LIFO)
Modifications can only be deleted in LIFO (Last-In-First-Out) order to maintain chronological integrity. Only the most recent modification shows a delete button; earlier modifications display a lock icon.
Chronological Integrity
Record lease modifications
Lease102 handles FRS 102 modification accounting with automatic remeasurement.