Shortening the duration of a lease contract line
You can shorten the duration of lease contract lines by adjusting the end date. The contract is recalculated from the date effective that you specified. The liability and the right-of-use are recalculated based on the shortened duration.
The right-of use is reduced by a factor that is calculated as follows:
Example: a contract line with a duration of 20 years is shortened by 6 years in year 10. New remaining duration of the contract line is 4 years; the original remaining duration was 10 years. The reduction factor is:
The liability is recalculated based on the date effective. The difference between the changed liability and right-of-use is registered as gain/loss.
Please note the following:
• The 'Reduce scope' feature is only available for:
◦ IFRS16 finance leases - lessee only
◦ ASC842 long-term (>1 year) operating leases and finance leases
• The 'Reduce scope' feature is not supported when using multiple accounting standards.
• You cannot use the 'reduce scope' feature in combination with reasonably certain renewal and reasonably certain termination options.
Procedure
1. At the Contracts selection level, select the for which contract you want to shorten.
2. Go to .
3. Select the required lease contract line(s).
4. On the action panel, click Reduce scope. The Enter values window is displayed.
5. In the Physical extent 'Y' / End date 'N'? field, click No. This implies that you are changing the end date.
6. In the Add modification on field, specify the date on which the change is to become effective.
 | The date effective is restricted to the start date of an accounting commitment period. |
7. In the End date field, specify the new end date.
8. Click OK to confirm.
After you have confirmed the date effective and the new end date, Planon:
◦ calculates the impact on the liability: the outstanding liability at the time of the change, compared to the outstanding liability on the old end date versus the outstanding liability on the new end date.
◦ calculates the impact on the right-of-use: the outstanding right-of-use at the moment of the change, compared to the outstanding right-of-use on the old end date versus the outstanding right-of-use on the new end date.
◦ starting from the Add modification on date, Planon recalculates all amounts on the contract line based on the new end date.
◦ generates an accounting commitment of the type RS_ENDDATE, Reduced scope end date (see Accounting commitment types).
◦ calculates the difference between the changed liability and right-of-use. This amount is registered as gain or loss in a posting (with fixed account SR_GALO).
◦ registers a financial event with the code SHORTEN (Financial event registration).
After you have shortened the duration of a lease contract line, an automated remeasurement is performed per change effective date.