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Scope

ASC 842-10-15-36

A lessee shall remeasure and reallocate the consideration in the contract upon either of the following:

a. A remeasurement of the lease liability (for example, a remeasurement resulting from a change in
the lease term or a change in the assessment of whether a lessee is or is not reasonably certain to
exercise an option to purchase the underlying asset) (see paragraph 842-20-35-4)

b. The effective date of a contract modification that is not accounted for as a separate contract (see
paragraph 842-10-25-8).

See LG 5 for information on lease modifications and remeasurement. A lessee should not reallocate
consideration simply as a result of changes in prices used to determine the proportionate allocations,
unless there is an indication that the initial allocation was inaccurate based on information that was
available at the time.

A lessor should only reallocate consideration when there is a contract modification that is not
accounted for as a separate, new contract.

2.6 Reassessment of whether a contract contains a lease

The determination of whether an arrangement is, or contains, a lease is performed at the inception of
the arrangement, which is different from when the lease classification and measurement is performed.
See LG 3.2.1 for information on the timing of performing the classification and measurement analysis.
Once it is determined that an arrangement is, or contains, a lease, that determination should only be
reassessed if the legal arrangement is modified. Changes to assumptions such as market-based factors
do not trigger a reassessment.

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