Accounting for Rent Free Periods in a new lease

System
System Posts: 100,534 🤖 Admin 🤖
edited 12:08PM in AAT member discussion
Hi,

Please could anyone provide some advice on accounting for Rent Free Periods.

We have just taken on a new lease and have been given an initial 6 month rent free period as an incentive. I've sat here for a while trying to figure this out but have come to a grinding hault.

Any advice or help would be much apreciated.

Thanks

Chris

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting for Rent Free Periods in a new lease

    You would just normally account for the rent when it starts after six months, so for the first six months you wouldn't make any accounting entries.

    Kind regards
    Steve

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting for Rent Free Periods in a new lease

    Hi,

    Thanks for the reply.

    That was my first thought but wanted to check before I left quite a few £££'s out of the management accounts.

    It's all a bit odd how it's currently being done though. Long story!

    Thanks Again

    Chris



  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting for Rent Free Periods in a new lease

    From a financial reporting stance, you must spread the total cost over the entire period of the lease or, if shorter, over the period to the review date.

    I believe this is clarified in UITF28 here.

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting for Rent Free Periods in a new lease

    Dean is right to bring this up. However, this abstract doesn't apply if you are reporting under FRSSE so you need to establish whether you are reporting using full FRS or FRSSE - FRSSE is a very much compressed version of the FRSs. The spreading provisions for lease incentives in FRSSE is referred to in paragraph 7.6 (FRSSE commencing Jan 05)

    Kind regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting for Rent Free Periods in a new lease

    Thanks guys.

    To be honest accounting for Rent Free Periods isn't something I've really come across all that much but when the MD insisted on it being shown in a very particular way in the accounts it through me a bit.

    I was having a look through the SSAP's but couldn't find a great deals on it and haven't had a chance to read into it much.

    I've sorted it out now. Always a nightmare trying to finish the management accounts whilst trying to make sure that the opening of a new store is all being accounted for correctly!

    Thanks Again

    Chris

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting for Rent Free Periods in a new lease

    Operating leases are dealt with in SSAP 21.

    Regards
    Steve
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Accounting for Rent Free Periods in a new lease

    Steve is correct to distinguish between regular and FRSSE treatment but in this case the treatment is exactly the same.

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