Early Lease Termination
Early lease termination occurs when a lease ends before its contractual end date. FRS 102 requires derecognition of the lease liability and ROU Asset, with any difference recognised as a gain or loss.
When to Terminate
Use the termination feature when a lease ends completely before its scheduled end date:
Use Termination For
Break clause exercise, lease surrender by agreement, asset destruction or becoming unusable, and lease buy-outs.
Do NOT Use Termination For
Natural lease expiry (use status change to 'Expired'), modifications that shorten the term (use Modification instead), or partial surrender of space (use scope decrease modification).
Termination Accounting
Upon termination, the following accounting treatment applies:
FRS 102 Reference: FRS 102.20.54-20.58
| Component | Treatment |
|---|---|
| Remaining Lease Liability | Derecognised in full |
| Remaining ROU Asset (NBV) | Derecognised in full |
| Settlement Payment | Recognised as expense (if any) |
| Difference | Gain or loss on termination |
Journal Entry Format
The termination journal entry derecognises both the liability and asset:
Termination Journal Entry
Recording a Termination
To terminate a lease: Open the lease, click Actions > Terminate Lease, enter the termination date and any settlement payment, select or enter a reason, and confirm. The lease status changes to 'Terminated' and the gain/loss is calculated automatically.
After Termination
Once terminated: the lease status changes to 'Terminated', termination details appear on the lease summary, the final amortisation schedule reflects the shortened term, and exports include a termination section with the accounting details.
Handle early terminations
Lease102 calculates termination gains and losses automatically per FRS 102.