Dilapidations
A UK term for the cost of repairing or restoring a leased property to its original condition at the end of the lease.
Definition
Dilapidations refer to the liability a lessee faces for returning a leased property to the condition specified in the lease — typically the original condition before the lessee made any alterations or suffered any wear and tear beyond fair usage. In lease accounting, the estimated future dilapidations cost is recognised as a provision (often called a restoration provision or reinstatement obligation) at the commencement date, with a corresponding addition to the right-of-use asset. The provision is then unwound at the discount rate over the lease term.
Why it matters
Dilapidations are a significant and often underestimated liability for commercial property lessees, particularly those who have occupied premises for a long time. Failing to recognise the provision understates liabilities and overstates profit.
In AuditLease
AuditLease captures the restoration provision amount as a lease input, includes it in the initial ROU asset measurement, and tracks it separately in the lease record.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence, so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.