Page 189 - pwc-lease-accounting-guide_Neat
P. 189
Modification and remeasurement of a lease
Year 4 Year 5 Year 6 Year 7 Total
Lease
payment $110,000 $110,000 $110,000 $110,000 $440,000
Discount 0 6,226 12,100 17,462 35,969
Present value $110,000 $103,774 $97,900 $92,358 $404,031
To calculate the adjustment to the lease liability, Lessee Corp would compare the recalculated and
original lease liability balances on the remeasurement date.
Revised lease liability $404,031
Original lease liability 607,569
($203,538)
Lessee Corp would record the following journal entry to adjust the lease liability.
Dr. Lease liability $203,538
Cr. Right-of-use asset $203,538
Income statement impact
The single lease expense would be recalculated using the following formula.
Future undiscounted cash flows at the remeasurement date + (the right-of-use asset
- the lease liability immediately after the remeasurement)
Remaining lease term
$440,000 + ($371,010 - 404,031) = $101,745 single lease expense
4
The annual single lease expense of $101,745 would be recognized for the remaining term of the lease.
EXAMPLE 5-9
Remeasurement due to change in timing of leasehold incentive receivable
On January 1, 20X1, Lessee Corp enters into a contract with Lessor Corp to lease a building.
5-27
