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Appendix C: Key terms

Term Definition

Lease liability A lessee’s obligation to make lease payments arising
from a lease, measured on a discounted basis

Lease modification A change to the contractual terms and conditions of a
lease that was not part of the original terms and
conditions of the lease that results in a change in the
scope of or the consideration for the lease

Lease payments Payments required from a lessee to a lessor relating
to the right to use an underlying asset, consisting of
the following:
Fixed payments, including in substance fixed
payments, less any lease incentives received or
receivable from the lessor
Variable lease payments that depend on an index or a
rate, based on the index or rate on the lease
commencement date

The exercise price of a purchase option if the lessee is
reasonably certain to exercise that option

Payments for penalties for terminating the lease, if
the lease term reflects the lessee exercising an option
to terminate the lease
Amounts probable of being owed under residual
value guarantees
Fees paid by the lessee to the owner of the special
purpose entity for structuring the transaction
Lease payments do not include payments allocated to
nonlease components of a contract except when the
lessee elects to combine nonlease and lease
components and account for them as a single lease
component

Lease term The noncancellable period for which a lessee has the
right to use an underlying asset, together with all of
the following:
Periods covered by an option to extend the lease if the
lessee is reasonably certain to exercise that option
Periods covered by an option to terminate the lease if
the lessee is reasonably certain not to exercise that
option

Periods covered by an option to extend (or not
terminate) the lease in which exercise of the option is
controlled by the lessor

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