If you have an option to renew your Agreement that is either approaching or overdue, you’ll need to complete the Renewal Event on the Agreement Timeline. This article will walk you through how to do so. 

Is the recent Renewal included in IFRS 16 Reports?

This will depend on how you previously completed the IFRS 16 Questionnaires. If, at the Commencement of your Agreement, you factored this option into your IFRS 16 Reporting period, it will automatically pull through to your reports. If you didn't include this Renewal in your assumptions at Commencement but now want to report on it, you'll need to update your Expected Renewals to include it.

How to Complete Renewals

1. Select the Renewal Event you would like to update, and click “Start Event”.

2. At the Data step, select “Yes the Renewal will be exercised” or “No the Renewal will not be exercised”, depending on which option is relevant. 

If you've selected “No the renewal will not be exercised”, click “Expire” and add an additional explanation (if your organisation requires). Please note that even though "Expire" is selected by default, you'll need to actively click “Expire” again before you're able to click “Next” to continue.

3. If there are additional changes to the contractual provisions of your Agreement which take effect from the Renewal date, select “Yes there are variations to the agreement”, and follow our guidance on adding a Variation to a scheduled Event. If there are no changes effective from the Renewal date, select “No additional variations”, then click “Next”.

4. Upload any supporting Documentation, or select “No Documentation” and click “Next”.

5. Click “Complete”. You'll see a certification nothing that the Event has been completed, and the event icon will turn green. If you need to update your IFRS 16 Settings from the same date, you can do this by clicking “Yes” at the IFRS 16 Settings Change Questionnaire.

How to End the Agreement at a Renewal Event

1. Select the Renewal Event you would like to update, and click “Start Event”.

2. At the Data step, select “No the Renewal will not be exercised”.

3. Select “Expire” and add an explanation if required. Please note that even though “Expire” is selected by default, you'll need to actively click “Expire” again before you can click “Next” to continue.

4.  A window will pop up, confirming you want to expire the Agreement. Click “Continue”.

5.  Upload any Documentation, or select “No Documentation”, and click “Next”.

6. Click “Complete”. You'll see a certification nothing that the Event has been completed, and the event icon will turn green. 

Reflecting changes to Expected Renewals in your IFRS 16 Judgments

If your selected expected number of renewals does not align with expiring your Agreement at the relevant renewal date, you will need to update your expected number of renewals. This will ensure that IFRS 16 reporting concludes at the correct date. You can do this by clicking “Yes” at the IFRS 16 Settings Change Questionnaire.

For instance, an Agreement wherein you chose 4 renewals initially, but by the 2nd renewal event, you decide to exit the agreement. If you don't adjust the expected number of renewals, your IFRS 16 reporting would continue beyond that 2nd exit point. You would need to update the expected renewals to end reporting at that exit point. 

As it is often known in advance that you will exit an agreement at a renewal date, a Variation event can be used as a placeholder to record a change in the expected number of renewals. To do this: 

1. From the Agreement Timeline, click “Action”, then “Create / Edit Events”.

2. This will take you to the Events page of the Agreement Creation Process. Scroll down to the Variation section and using the calendar tool or text field record the date the change to your IFRS 16 Judgments should take place from. Remember to click “Add”.

3. Click “Done” at the top of the page to return to the Agreement Timeline.

4. You'll now see a new icon on the Agreement Timeline representing the Variation Event you just added in.

5. Click on the Variation Event icon, and at Step 1 select “Start Event”. 

6. At the Data step, you can select “No”, as in there are no other variations to this Agreement, then click “Next”.

7. Upload any supporting Documentation, or select “No Documentation” and click “Next”.

8. Click “Complete”. You'll see a certification noting that the Event has been completed, and the event icon will turn green. 

9. At Step 5, on the IFRS 16 Settings Change Questionnaire, select “Yes Settings Should Change”. 

10. Go to the Expected Renewals section of the Settings Change Questionnaire.
    • Toggle “Is there a change in the anticipated number of renewals?” to “Yes”. Then from the available options, select the renewal that aligns with the renewal event you are expiring the Agreement.
    • Record the effective date of change (this should match the Event Date of the Event you're completing the IFRS Settings Change Questionnaire on).
    • If there has been a change in the discount rate, you can record the new percentage in the space provided. 

11. Scroll to the bottom of the questionnaire and click “Save”.

To validate this in the IFRS 16 Reports, you will see reporting cease on the last day of your selected renewal period. 

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