Contracts can be onerous from the beginning, or they can become onerous after a change of circumstances that leads to a rise in expected costs or a decrease in the expected economic benefits associated with the contract.

What makes a lease onerous?

An onerous contract is a contract in which the aggregate cost required to fulfill the agreement is higher than the economic benefit to be obtained from it. ... Another example of an onerous contract is when a lessee is still obligated to make payments under the terms of an operating lease, but is no longer using the asset.

How do you determine if a contract is onerous?

These requirements specify that a contract is 'onerous' when the unavoidable costs of meeting the contractual obligations – i.e. the lower of the costs of fulfilling the contract and the costs of terminating it – outweigh the economic benefits.