Core TSIs : Lease Accounting : Working with GASB lease accounting : GASB - scope : Indexation method on renewal options
Indexation method on renewal options
In GASB, if you renew a contract, 'retrospective indexation' is used to calculate the financial commitments for the renewal period. Here, the indexation percentage is applied from the beginning of the contract's duration, and considered for the renewal period. This can be understood clearly form the example given below:
Table showing an overview of renewal options in combination with indexationTable showing an overview of renewal options in combination with indexation
Multiple renewal options can be created with different indexation percentages for a contract period. If no indexation percentage is specified for a renewal option, the previous indexation percentage is considered.
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The renewal depends on two factors - Indexation method must be percentage based retrospective indexation and the Switch to 'reasonably certain'? setting on the contract option must be set to Yes. For information on Indexation method field, see Contract options fields.