(IAS 21: Paragraph 8):
Functional currency is the currency of the primary economic environment in which the entity operates.

1. Suspense Account for Transferring Balances  This GL Account is used:

   1. For all revisions: When a revision is complete, we will freeze the old version of this lease. The final journal entry for the old version will zero out the balance sheet accounts (Deferred Rent Asset, Deferred Rent Liability, Initial Direct Cost Asset), which will be reversed in first entry of the revision.

      1. We will use a Suspense Account in the event the balance sheet accounts do not offset.

      2. We will reverse the final journal entry for the old version in the first entry of the latest revision to establish the balance sheet accounts.  

2. Gain/Loss Account:  This GL Account is used if:

   1. Your revision start date and end date are in the same month (i.e., terminating the lease). The difference between your Deferred Rent Asset, Deferred Rent Liability and the Initial Direct Cost Asset will be recorded in a Gain/Loss Account.

(IAS 21: Paragraph 16):
The essential feature of a monetary item is a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency. Examples include: pensions and other employee benefits to be paid in cash; provisions that are to be settled in cash; lease liabilities; and cash dividends that are recognised as a liability. Similarly, a contract to receive (or deliver) a variable number of the entity’s own equity instruments or a variable amount of assets in which the fair value to be received (or delivered) equals a fixed or determinable number of units of currency is a monetary item. Conversely, the essential feature of a non-monetary item is the absence of a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency. Examples include: amounts prepaid for goods and services; goodwill; intangible assets; inventories; property, plant and equipment; right-of-use assets; and provisions that are to be settled by the delivery of a non-monetary asset.

(IAS 21: Paragraph 39):
The results and financial position of an entity whose functional currency is not the currency of a hyperinflationary economy shall be translated into a different presentation currency using the following procedures:
(a) assets and liabilities for each statement of financial position presented (ie including comparatives) shall be translated at the closing rate at the date of that statement of financial position;
(b) income and expenses for each statement presenting profit or loss and other comprehensive income (ie including comparatives) shall be translated at exchange rates at the dates of the transactions; and
(c) all resulting exchange differences shall be recognised in other comprehensive income.

(IAS 21: Paragraph 40):
For practical reasons, a rate that approximates the exchange rates at the dates of the transactions, for example an average rate for the period, is often used to translate income and expense items. However, if exchange rates fluctuate significantly, the use of the average rate for a period is inappropriate.

(IAS 21: Paragraph 16):
The essential feature of a monetary item is a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency. Examples include: pensions and other employee benefits to be paid in cash; provisions that are to be settled in cash; lease liabilities; and cash dividends that are recognised as a liability. Similarly, a contract to receive (or deliver) a variable number of the entity’s own equity instruments or a variable amount of assets in which the fair value to be received (or delivered) equals a fixed or determinable number of units of currency is a monetary item. Conversely, the essential feature of a non-monetary item is the absence of a right to receive (or an obligation to deliver) a fixed or determinable number of units of currency. Examples include: amounts prepaid for goods and services; goodwill; intangible assets; inventories; property, plant and equipment; right-of-use assets; and provisions that are to be settled by the delivery of a non-monetary asset.

(IAS 21: Paragraph 39):
The results and financial position of an entity whose functional currency is not the currency of a hyperinflationary economy shall be translated into a different presentation currency using the following procedures:
(a) assets and liabilities for each statement of financial position presented (ie including comparatives) shall be translated at the closing rate at the date of that statement of financial position;
(b) income and expenses for each statement presenting profit or loss and other comprehensive income (ie including comparatives) shall be translated at exchange rates at the dates of the transactions; and
(c) all resulting exchange differences shall be recognised in other comprehensive income.

(IAS 21: Paragraph 40):
For practical reasons, a rate that approximates the exchange rates at the dates of the transactions, for example an average rate for the period, is often used to translate income and expense items. However, if exchange rates fluctuate significantly, the use of the average rate for a period is inappropriate.

(IFRS: Paragraph 12,17):
Paragraph 12: For a contract that is, or contains, a lease, an entity shall account for each lease component within the contract as a lease separately from non-lease components of the contract, unless the entity applies the practical expedient in paragraph 15. Paragraphs B32–B33 set out guidance on separating components of a contract.

Paragraph 17: For a contract that contains a lease component and one or more additional lease or non-lease components, a lessor shall allocate the consideration in the contract applying paragraphs 73–90 of IFRS 15.

(IFRS 16: Appendix B, B33):
A contract may include an amount payable by the lessee for activities and costs that do not transfer a good or service to the lessee. For example, a lessor may include in the total amount payable a charge for administrative tasks, or other costs it incurs associated with the lease, that do not transfer a good or service to the lessee. Such amounts payable do not give rise to a separate component of the contract, but are considered to be part of the total consideration that is allocated to the separately identified components of the contract.

(IFRS 16: Paragraph B37):
At the commencement date, an entity assesses whether the lessee is reasonably certain to exercise an option to extend the lease or to purchase the underlying asset, or not to exercise an option to terminate the lease. The entity considers all relevant facts and circumstances that create an economic incentive for the lessee to exercise, or not to exercise, the option, including any expected changes in facts and circumstances from the commencement date until the exercise date of the option. Examples of factors to consider include, but are not limited to:

(a) contractual terms and conditions for the optional periods compared to market rates, such as:
(i) the amount of payments for the lease in any optional period;
(ii) the amount of variable payments for the lease or other contingent payments, such as payments resulting from termination penalties and residual value guarantees; and
(iv) the terms and conditions of any options that are exercisable after initial option periods (for example, a purchase option that is exercisable at the end of the extension period at a rate that is currently below market rates)
(b) significant leasehold improvements undertaken (or expected to be undertaken) over the term of the contract that are expected to have significant economic benefit for the lessee when the option to extend or terminate the lease, or to purchase the underlying asset, becomes exercisable;
(c) costs relating to the termination of the lease, such as negotiation costs, relocation costs, costs of identifying another underlying asset suitable for the lessee’s needs, costs of integrating a new asset into the lessee’s operations, or termination penalties and similar costs, including costs associated with returning the underlying asset in a contractually specified condition or to a contractually specified location;
(d) the importance of that underlying asset to the lessee’s operations, considering, for example, whether the underlying asset is a specialised asset, the location of the underlying asset and the availability of suitable alternatives; and
(e) conditionality associated with exercising the option (ie when the option can be exercised only if one or more conditions are met), and the likelihood that those conditions will exist.

(IFRS 16: Paragraph B38):
An option to extend or terminate a lease may be combined with one or more other contractual features (for example, a residual value guarantee) such that the lessee guarantees the lessor a minimum or fixed cash return that is substantially the same regardless of whether the option is exercised. In such cases, and notwithstanding the guidance on in-substance fixed payments in paragraph B42, an entity shall assume that the lessee is reasonably certain to exercise the option to extend the lease, or not to exercise the option to terminate the lease.

(IFRS 16: Paragraph B39):
The shorter the non-cancellable period of a lease, the more likely a lessee is to exercise an option to extend the lease or not to exercise an option to terminate the lease. This is because the costs associated with obtaining a replacement asset are likely to be proportionately higher the shorter the non-cancellable period.

(IFRS 16: Paragraph B39):
A lessee’s past practice regarding the period over which it has typically used particular types of assets (whether leased or owned), and its economic reasons for doing so, may provide information that is helpful in assessing whether the lessee is reasonably certain to exercise, or not to exercise, an option. For example, if a lessee has typically used particular types of assets for a particular period of time or if the lessee has a practice of frequently exercising options on leases of particular types of underlying assets, the lessee shall consider the economic reasons for that past practice in assessing whether it is reasonably certain to exercise an option on leases of those assets.

(IFRS 16: Paragraph B37):
At the commencement date, an entity assesses whether the lessee is reasonably certain to exercise an option to extend the lease or to purchase the underlying asset, or not to exercise an option to terminate the lease. The entity considers all relevant facts and circumstances that create an economic incentive for the lessee to exercise, or not to exercise, the option, including any expected changes in facts and circumstances from the commencement date until the exercise date of the option. Examples of factors to consider include, but are not limited to:

(a) contractual terms and conditions for the optional periods compared to market rates, such as:
(i) the amount of payments for the lease in any optional period;
(ii) the amount of variable payments for the lease or other contingent payments, such as payments resulting from termination penalties and residual value guarantees; and
(iv) the terms and conditions of any options that are exercisable after initial option periods (for example, a purchase option that is exercisable at the end of the extension period at a rate that is currently below market rates)
(b) significant leasehold improvements undertaken (or expected to be undertaken) over the term of the contract that are expected to have significant economic benefit for the lessee when the option to extend or terminate the lease, or to purchase the underlying asset, becomes exercisable;
(c) costs relating to the termination of the lease, such as negotiation costs, relocation costs, costs of identifying another underlying asset suitable for the lessee’s needs, costs of integrating a new asset into the lessee’s operations, or termination penalties and similar costs, including costs associated with returning the underlying asset in a contractually specified condition or to a contractually specified location;
(d) the importance of that underlying asset to the lessee’s operations, considering, for example, whether the underlying asset is a specialised asset, the location of the underlying asset and the availability of suitable alternatives; and
(e) conditionality associated with exercising the option (ie when the option can be exercised only if one or more conditions are met), and the likelihood that those conditions will exist.

(IFRS 16: Paragraph B38):
An option to extend or terminate a lease may be combined with one or more other contractual features (for example, a residual value guarantee) such that the lessee guarantees the lessor a minimum or fixed cash return that is substantially the same regardless of whether the option is exercised. In such cases, and notwithstanding the guidance on in-substance fixed payments in paragraph B42, an entity shall assume that the lessee is reasonably certain to exercise the option to extend the lease, or not to exercise the option to terminate the lease.

(IFRS 16: Paragraph B39):
The shorter the non-cancellable period of a lease, the more likely a lessee is to exercise an option to extend the lease or not to exercise an option to terminate the lease. This is because the costs associated with obtaining a replacement asset are likely to be proportionately higher the shorter the non-cancellable period.

(IFRS 16: Paragraph B39):
A lessee’s past practice regarding the period over which it has typically used particular types of assets (whether leased or owned), and its economic reasons for doing so, may provide information that is helpful in assessing whether the lessee is reasonably certain to exercise, or not to exercise, an option. For example, if a lessee has typically used particular types of assets for a particular period of time or if the lessee has a practice of frequently exercising options on leases of particular types of underlying assets, the lessee shall consider the economic reasons for that past practice in assessing whether it is reasonably certain to exercise an option on leases of those assets.

Modification: This is an amendment to a lease (including full or partial lease termination).

• Full Termination: If a Term of 1 month is entered, the LT & ST Deferred Rent and Initial Direct Cost Asset will be reduced to zero on the Revision Date, with any difference booked to the Gain/Loss Account selected in “GL Accounts” tab. 

Remeasurement: Reassess lease due to an event (i.e., no contract amendment). A remeasurement comes in the following three forms:

• Exercise of: a) lease term or b) purchase option ONLY IF one of the following events occurs:

  • event occurs (that was previously written into the contract) that obliges the lessee to exercise or not exercise an option*

  • lessee elects to exercise an option* (when previously determined it wouldn't)

  • lessee elects to not to exercise an option* (when previously determined it would)
    *option can be an early termination option, renewal option or option to purchase the underlying asset

• Update Residual Value Guarantees at end of term for actual amount received

• Change in payments due to a change in an index (e.g., cost of living adjustment) used to determine those payments.

• Change in payments due to payments tied to a floating interest rate (e.g., LIBOR) used to determine those payments.

Change lease data in the middle of a lease: This Revision is not part of the technical guidance, but rather a practical consideration in which you can change a parameter of the lease (e.g., Location, GL Accounts) in the middle of the lease, allowing lessee to report on that lease differently from the date of the Revision.

Revision Pro Tip: After selecting “Add Revision” in edit mode, for the three parameters below:

1. Update values as of the date of the Revision, indicated with “Update” below.

2. Software will carryforward the same values from the previous version of the lease (i.e., do not reassess values as of the date of the Revision), indicated with “S” which stands for Same below.

IFRS 16 Lessor Revision Types:

(1) Historical FX Rate: 
No technical guidance exists as to updating Historical fx Rate (when local currency is different than functional currency) for a Revision, other than a SEC inquiry response. The SEC response is to follow the same technical guidance as to when to update the Discount Rate or reassess Classification (see Discount & Classification columns in the table above and technical references in (2) & (3) below).

(2) Discount Rate: (IFRS 16: Paragraph 68, Paragraph 87)
(3) Classification: (IFRS 16: Paragraph 66)

Technical Guidance:
(IFRS 16: Paragraph 85):
A lessor shall apply IAS 36 to determine whether an underlying asset subject to an operating lease is impaired and to account for any impairment loss identified.

(IFRS 16: Paragraph 87):
A lessor shall account for a modification to an operating lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease receipts for the new lease.