Variable lease payments
Payments that vary based on usage, performance, or a factor other than the passage of time.
Definition
Variable lease payments linked to an index or rate (such as CPI or SONIA) are included in the initial lease liability measurement at the current index rate, and remeasured when the index is updated. Variable payments based on actual usage or performance are excluded from the liability and recognised as expense when incurred.
Why it matters
The treatment of variable payments affects both the size of the lease liability and the timing of P&L charges. Index-linked payments require periodic remeasurement.
In AuditLease
AuditLease supports index-linked escalation as part of the payment schedule and flags leases for remeasurement when an index update is recorded.
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.