Service charge
A charge in a property lease covering shared costs such as building maintenance, insurance, and utilities.
Definition
Service charges are common in commercial property leases and represent payments for services rather than for the right to use the property. Under IFRS 16, service charges are generally non-lease components and should be excluded from the lease liability measurement.
Why it matters
Including service charges in the lease liability overstates it. Identifying and separating service charges requires reviewing the lease terms and, sometimes, management estimates of the service charge element.
In AuditLease
AuditLease lets you record service charges separately from lease payments and document the judgement on 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.