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 index or rate in force at commencement, and remeasured when a change in the index or rate changes the payments. Variable payments based on actual usage or performance are excluded from the liability and generally recognised in profit or loss when the event or condition that triggers them occurs, unless included in the carrying amount of another asset under another applicable standard (or, under FRS 102, another section).
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 remeasurement each time a change in the index changes the payments.
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.