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IFRS 16 - Partial Terminations (Doc ID 2721556.1)

Last updated on OCTOBER 20, 2020

Applies to:

Oracle Fusion Assets Cloud Service - Version and later
Information in this document applies to any platform.


Users need to understand with Oracle how to manage a Partial termination in the module IFRS 16.

In more detail:
Here below the explanation of the case and which should be the adjustments required both in the Lease liability and in the Rou asset.

Partial termination (e.g. users have a contract with original end date 31.12.2021 and without the option to early terminate in the contract. They are on September and decided to early terminate the contract on June 2021)
In case of partial termination, at the effective date of the lease modification the lessee should book the partial termination of the lease contract:

  * Reducing the pre-modification right-of-use asset and lease liability
  * Recognizing any resulting gain or loss on partial termination for the previous point (equal to the difference between the Rou asset net and the lease liability, at the partial termination date)
  * Remeasuring the new lease liability

  1. Reviewing the lease term including the early termination;
  2. Increasing the carrying amount for any value of the termination penalty;
  3. by discounting the revised lease payments at the revised IBR

  * Remeasuring the Right of use asset:

  1. Adjusting the carrying amount for the difference between the remeasured lease liability and the pre-adjusted lease liability
  2. Reviewing the life of the asset considering the end date of the right to use (the life of the asset will be aligned with the lease term of the contract unless the Right of use of the asset ends in a different date from the lease term of the contract)

Users know which is the way to manage a Full termination but this is a different case because they need to recognize a gain/loss on the partial termination and to maintain the remeasured lease liability and Rou asset according to the new renegotiated contract.


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