Index-linked rent
Lease payments that rise in line with a published index such as CPI or RPI.
Definition
Where lease payments increase in line with an index (such as CPI, RPI, or a property index), the payments are variable lease payments linked to an index. At commencement, the index in force at that date is used, so the opening liability does not anticipate future index changes. When a change in the index changes the payments, the lease liability is remeasured to reflect the revised payments, with a corresponding adjustment to the right-of-use asset (any reduction beyond the carrying amount of the asset goes to profit or loss).
Why it matters
Index-linked leases require remeasurement each time a change in the index changes the payments. The remeasurement adjusts the lease liability and, normally, the right-of-use asset.
In AuditLease
AuditLease does not apply index changes automatically. When an index change takes effect you record it on the lease as an index-linked remeasurement, with its effective date and the new payment amount; the original discount rate is retained and the earlier calculation run is kept.
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.