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hi and welcome to accounting academy im Fitz and this is my dog FIFO we love to help people learn more about accounting so join us on our adventures as we dive into accounting topics on todays adventure we are going to be helping our friend Paul he recently modified some of his leases and has asked for help he owns a chain of veterinary clinics called Pet Vet get back here FIFO its just the vet Hey Paul how are things going. Hey guys things are going great but Im totally stumped on how I should account for a few changes to my leases. Well lets run through them see what we can do. Okay great the first clinic is doing a ton of business and we are expanding. I had a thousand square foot office and now Im adding another thousand square feet. However, the new square footage is being added to the contract at the current market rate which is higher. Okay I see so the cost of the expansion is more than the original square footage you had. Yeah thats corre

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Is rent free period included in lease term?

Fit-out period is a rent free period agreed between the parties in which the lessee is not liable to pay the rent and the time duration is used to enable the lessee to necessary equipment for them to use the property for the intended purpose.

Can you end a tenancy agreement early?

You can only end your fixed term tenancy early if your agreement says you can or by getting your landlord to agree to end your tenancy. If your agreement says you can end your fixed term tenancy early, this means you have a break clause. Your tenancy agreement will tell you when the break clause can apply.

What is unamortized free rent?

UNAMORTIZED RENT means, for any applicable Site, an amount equal to the product of (x) the Rent or Pre-Lease Rent, as applicable for such Site, and (y) a fraction, the numerator of which is the number of years (to three decimal places) remaining from and after the applicable measuring date to the Site Expiration

How do you account for deferred rent?

What is the Accounting for Deferred Rent? Accounting for the free rent period and subsequent periods are as follows: Add the total cost of the rent payments for the entire lease period. Then divide this total amount of payments by the total number of periods in the lease, including any early access period.

Does a lease automatically renew BC?

At the end of a fixed-term tenancy agreement, you and your landlord can agree to another fixed termotherwise, the lease automatically continues on a month-to-month basis.

How is free rent amortized?

A free rent period is a type of lease incentive that has a discrete cash value. For example, 2 months of free rent in a $1000/month space has a value of $2000. Any lease incentive of this type must be amortized over the life of the lease on a straight-line basis.

Is free rent an expense?

Periods of free rent, rent abatements, and escalating payments are all factored into a straight-line rent expense calculation. For lease payments that escalate due to the tenant gaining access to additional assets, the expense will be recognized in proportion to the additional leased property.

What does amortized mean for rent?

This means that the total value of the rent relief you receive during this time will be added to your base rent payments in the future. You wouldnt need to extend your lease, but your monthly rent would increase in the future to essentially pay back this rent over the life of your lease.

How can I get out of my lease without penalty in Victoria?

Breaking your agreement (lease) with costs Ending your agreement early is usually done by giving the rental provider (landlord) written notice of your intention to vacate, including advising of your vacate date, and handing back the keys when you move out. There is no minimum notice period in these circumstances.

How do I account for rent free period lessor?

Accounting for the free rent period and subsequent periods are as follows: Add the total cost of the rent payments for the entire lease period. Then divide this total amount of payments by the total number of periods in the lease, including any early access period.

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