Lease incentive
A benefit provided by the lessor to induce the lessee to enter into a lease — such as a rent-free period, fit-out contribution, or cash payment.
Definition
Lease incentives are payments or concessions made by the lessor to encourage the lessee to sign the lease. Common forms include rent-free periods at the start of the lease, cash contributions towards fit-out costs, and stepped rent arrangements that begin below market rate. Under IFRS 16 and amended FRS 102, lease incentives received reduce the initial measurement of the right-of-use asset. They are not recognised as income immediately but are spread over the lease term through the lower ROU asset carrying amount.
Why it matters
Lease incentives are common in commercial property markets and must be treated correctly — reducing the ROU asset rather than being recognised as income. Getting this wrong overstates the ROU asset and misstates profit.
In AuditLease
AuditLease includes a lease incentives received field in the lease measurement inputs, which reduces the initial ROU asset calculation.
Related terms
Official sources
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.