Control changes at their effective date

On July 1, Cedar Trail adds adjacent warehouse space and extends the original term. The amendment is dated July 1; the original lease commenced 3 years ago. The close team proposes replacing the original schedule from day one.

That destroys the audit trail.

Test a separate contract first

A modification is a separate contract only when it grants an additional right of use and the price increase is commensurate with that right's standalone price in the contract's circumstances. Preserve both parts of the test. If it passes, the original lease continues and the added right begins separately.

Remeasure an existing lease at the change date

For a non-separate lessee modification, preserve the opening liability and ROU asset immediately before the effective date. Account for a scope reduction when applicable, allocate modified consideration, reassess classification, apply the required revised rate, and adjust the ROU asset or recognize the applicable gain or loss.

Specified changes in term or purchase-option assessment can trigger remeasurement even without a contractual modification. Not every index change or market-rate movement does. Identify the trigger before changing the model.

For example, new operating facts can make exercise of a renewal option that was previously excluded reasonably certain. That supplied reassessment changes the supported term and can trigger remeasurement even though the parties did not amend the contract. By contrast, a market borrowing rate moving from 6 to 7 percent, by itself, does not reopen an unchanged lease. A payment tied to an index follows its applicable variable-payment and remeasurement rule; a change in the index must not be treated as a general invitation to refresh every assumption.

Keep impairment on the asset rail

Test the ROU asset under the long-lived-asset impairment model. The lease liability remains a contractual obligation. After an operating ROU asset is impaired, the later single-cost mechanics no longer continue unchanged; track ROU amortization and liability accretion under the applicable post-impairment rules.

Keep a sublease and head lease separate

An intermediate lessor evaluates the sublease while continuing head-lease accounting unless another derecognition basis exists. Netting expected sublease income against the head-lease liability hides both credit and obligation risk.

Exit check

Create a change clock for the case amendment: previous carrying amounts, effective date, added right, standalone-price evidence, scope reduction, revised payments, revised rate, new classification, ROU adjustment, and unresolved items. No row may overwrite a historical period.