Modification or new lease? Reading the contract change

Not every landlord letter is a lease modification under IFRS 16. Some changes are accounted for as a separate lease; others adjust the existing liability; a few are simply variable payments that never touched the initial measurement.

Square-footage expansions that add an identified asset often create a separate lease component. Pure rent holidays during a fit-out may revise consideration without changing the scope. Early terminations with penalties require careful reading of whether the lessee's right of use has ended.

During renewal-period follow-up work, we ask teams to keep a change log with the effective date, the clause reference, and a preliminary view: separate lease, modification, or variable payment. That log becomes the sampling universe for the next visit.

If the change is material and the accounting path is unclear, pause journal entries until the classification is settled. Reversing an incorrect remeasurement mid-close costs more than a short consultation before the books move.