{"id":1492,"date":"2025-11-14T13:19:28","date_gmt":"2025-11-14T17:19:28","guid":{"rendered":"https:\/\/visuallease.com\/?p=1492"},"modified":"2025-11-17T02:16:00","modified_gmt":"2025-11-17T06:16:00","slug":"best-practices-for-variable-rent-leases","status":"publish","type":"post","link":"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/","title":{"rendered":"Variable rent leases: Accounting best practices for ASC 842 &amp; IFRS 16"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#What_are_variable_payments\" >What are variable payments?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#Why_are_variable_rent_leases_so_complex_from_an_accounting_standpoint\" >Why are variable rent leases so complex from an accounting standpoint?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#How_are_variable_rent_leases_accounted_for_under_ASC_842_and_IFRS_16\" >How are variable rent leases accounted for under ASC 842 and IFRS 16?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#What_are_the_key_considerations_for_tracking_and_reporting_variable_rent_lease_data\" >What are the key considerations for tracking and reporting variable rent lease data?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#What_are_the_challenges_of_accounting_for_variable_rent_leases\" >What are the challenges of accounting for variable rent leases?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#Best_practices_for_recording_and_tracking_variable_rent_lease_data\" >Best practices for recording and tracking variable rent lease data<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#1_Identify_all_the_variables_in_your_lease_payments\" >1. Identify all the variables in your lease payments<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#2_Isolate_every_variable_in_your_lease_management_and_accounting_system\" >2. Isolate every variable in your lease management and accounting system<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#3_Creating_the_data_right_structure\" >3. Creating the data right structure<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#Visual_Lease_accommodates_complex_lease_structures_and_makes_your_workflow_simple\" >Visual Lease accommodates complex lease structures and makes your workflow simple<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#What_are_the_different_types_of_variable_rent_leases\" >What are the different types of variable rent leases?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#How_are_variable_lease_payments_treated_in_accounting\" >How are variable lease payments treated in accounting?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#What_are_variable_lease_payments_under_IFRS_16\" >What are variable lease payments under IFRS 16?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#Are_variable_lease_payments_included_in_lease_liability\" >Are variable lease payments included in lease liability?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#Whats_the_difference_between_variable_and_fixed_loans\" >What\u2019s the difference between variable and fixed loans?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/visuallease.com\/best-practices-for-variable-rent-leases\/#Which_features_track_co-working_memberships_as_short-term_leases\" >Which features track co-working memberships as short-term leases?<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n[vc_row type=&#8221;in_container&#8221; full_screen_row_position=&#8221;middle&#8221; scene_position=&#8221;center&#8221; text_color=&#8221;dark&#8221; text_align=&#8221;left&#8221; overlay_strength=&#8221;0.3&#8243; shape_divider_position=&#8221;bottom&#8221;][vc_column column_padding=&#8221;no-extra-padding&#8221; column_padding_position=&#8221;all&#8221; background_color_opacity=&#8221;1&#8243; background_hover_color_opacity=&#8221;1&#8243; column_shadow=&#8221;none&#8221; column_border_radius=&#8221;none&#8221; width=&#8221;1\/1&#8243; tablet_text_alignment=&#8221;default&#8221; phone_text_alignment=&#8221;default&#8221; column_border_width=&#8221;none&#8221; column_border_style=&#8221;solid&#8221;][vc_column_text]<img decoding=\"async\" class=\"aligncenter wp-image-1493 size-full\" src=\"https:\/\/visuallease.com\/wp-content\/uploads\/2018\/12\/variable-rent-blog-picture-.jpg\" alt=\"\" width=\"4826\" height=\"2931\" srcset=\"https:\/\/visuallease.com\/wp-content\/uploads\/2018\/12\/variable-rent-blog-picture-.jpg 4826w, https:\/\/visuallease.com\/wp-content\/uploads\/2018\/12\/variable-rent-blog-picture--300x182.jpg 300w, https:\/\/visuallease.com\/wp-content\/uploads\/2018\/12\/variable-rent-blog-picture--768x466.jpg 768w, https:\/\/visuallease.com\/wp-content\/uploads\/2018\/12\/variable-rent-blog-picture--1024x622.jpg 1024w\" sizes=\"(max-width: 4826px) 100vw, 4826px\" \/><\/p>\n<p>When <a href=\"https:\/\/visuallease.com\/compliance\/asc-842\/\">ASC 842<\/a> and <a href=\"https:\/\/visuallease.com\/compliance\/ifrs-16\/\">IFRS 16<\/a> were first announced, there was quite a bit of uncertainty about how the accounting would work for variable rent leases. Large public companies found themselves in the role of early adopters, and had to work out many complex accounting calculations and processes that had never been done before.<\/p>\n<p>FASB and IASB have since provided revised guidance, and accounting advisors and technology providers (like Visual Lease) have learned valuable lessons from the experience of helping public companies move toward compliance in 2018.<\/p>\n<p>If you are part of the next wave of organizations ramping up your lease accounting compliance efforts for the 2019 deadline, you\u2019re in luck. You can benefit from the best practices developed over the past year, and avoid time-consuming mistakes and delays.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_are_variable_payments\"><\/span>What are variable payments?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Variable payments are payments that can fluctuate or change in amount based on specific factors or events. These factors could include variables such as usage, sales volume, market conditions, or other predefined triggers. Unlike fixed payments, which remain constant over time, variable payments can vary up or down depending on the circumstances they are tied to. These payments can be found in various contexts, including lease agreements, loans, contracts, and other financial transactions where the payment amount is subject to change based on certain conditions being met.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Why_are_variable_rent_leases_so_complex_from_an_accounting_standpoint\"><\/span>Why are variable rent leases so complex from an accounting standpoint?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In the past, the difficulty with variable rent leases was only about calculating the correct payment, whether that was based on on a variable interest rate, CPI increase, a percentage of sales, or some other variable factor.<\/p>\n<p>Under ASC 842 and IFRS 16, variable leases require much more complicated accounting. You\u2019ll need to understand how to break out all the components of variable rent leases, including non-lease components, so you\u2019ll be able to properly represent them on your balance sheet. Also, you need to consider how the accounting treatment will change over time.<\/p>\n<p><strong>Here\u2019s just one example to illustrate some of the issues that will arise with variable rent leases:<\/strong><\/p>\n<p>Let\u2019s say you have a lease that starts at $10,000 per month, with straightforward CPI increases over time. That base rent of $10,000 goes into the calculation of your ROU asset and liability, and the CPI increases are treated separately as variable payments.<\/p>\n<p>That process continues the same way (although the amounts of CPI increases may change each year) until something happens that requires a remeasurement of the lease, such as exercising an option. Upon remeasurement, all those CPI payments that were variable before now get treated as fixed payments that go into the calculations for ROU assets. Only the future CPI increases (after the remeasurement) qualify for the variable payment treatment.<\/p>\n<p>That\u2019s just for leases with simple CPI increases. What happens if your increase has a floor? Let\u2019s say each increase can\u2019t be less than 2 percent. In that case, the 2 percent becomes part of the fixed payment, and only increases above 2 percent are treated as a variable payment. To complicate matters further, if you also report under IASB or other non-US GAAP standards, CPI increases are handled differently. \u00a0Your accounting standard must be capable of handling multiple methods simultaneously.<\/p>\n<p>Needless to say, there\u2019s a great deal to learn. When it comes to handling all the complicated scenarios for variable rent leases, you will need guidance from your accounting advisors. Here\u2019s what is critical to know now as you begin preparing for compliance with the new lease standards:<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_are_variable_rent_leases_accounted_for_under_ASC_842_and_IFRS_16\"><\/span>How are variable rent leases accounted for under ASC 842 and IFRS 16?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Under both standards, variable rent leases are classified as finance leases. This means that the lessee must recognize a right-of-use asset and a lease liability on the balance sheet. The lease liability is calculated as the present value of the future lease payments, including any variable payments. The right-of-use asset is calculated as the cost of the lease, less any lease incentives received.<\/p>\n<p>The variable payments under a variable rent lease are treated as part of the lease liability. This means that the lease liability will increase or decrease each time the variable payments are adjusted. The lessee must also recognize interest expense on the lease liability over the lease term.<\/p>\n<p>The main difference in the treatment of variable rent leases under ASC 842 and IFRS 16 is how the variable payments are estimated. Under ASC 842, the variable payments are estimated using the most recent information available at the commencement of the lease. Under IFRS 16, the variable payments are estimated using the best available estimate at the commencement of the lease.<\/p>\n<p>The difference in the treatment of variable rent leases under ASC 842 and IFRS 16 can have a significant impact on the lessee&#8217;s financial statements. For example, if the variable payments are estimated to be higher under ASC 842 than under IFRS 16, the lease liability will be higher under ASC 842 and the lessee&#8217;s interest expense will also be higher.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"What_are_the_key_considerations_for_tracking_and_reporting_variable_rent_lease_data\"><\/span>What are the key considerations for tracking and reporting variable rent lease data?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Identifying all of the variables that affect the lease payments. This includes the index or rate that the rent is tied to, the amount of usage of the leased asset, and any other factors that are specified in the lease agreement.<\/li>\n<li>Tracking the values of the variables over time. This will allow you to accurately calculate the lease payments and update your accounting records accordingly.<\/li>\n<li>Recording the lease payments in your accounting system. This will ensure that the lease payments are properly reflected in your financial statements.<\/li>\n<li>Reporting the lease payments to your stakeholders. This may be required by law or regulation, or it may be necessary for internal reporting purposes.<\/li>\n<\/ul>\n<p>For finance executives evaluating whether to lease or buy specialized machinery, reporting is especially critical. Visual Lease surfaces side-by-side reports comparing total leasing costs with purchase costs, factoring in right-of-use asset values, lease liabilities, depreciation schedules, and variable payment obligations. These reports make it easier to model scenarios and guide strategic capital allocation.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_are_the_challenges_of_accounting_for_variable_rent_leases\"><\/span>What are the challenges of accounting for variable rent leases?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>There are several challenges to accounting for variable rent leases, including:<\/p>\n<ul>\n<li><strong>Complexity:<\/strong> Variable rent leases can be more complex to account for than fixed rent leases because the lease payments can fluctuate over time. This can make it difficult to accurately calculate the lease liability and right-of-use asset.<\/li>\n<li><strong>Volatility:<\/strong> The value of variable rent leases can be more volatile than the value of fixed rent leases. This is because the lease payments can be affected by changes in the index or rate that the rent is tied to, or by changes in the amount of usage of the leased asset. This volatility can make it difficult to forecast the future cash flows from the lease and to manage the lease risk.<\/li>\n<li><strong>Data management:<\/strong> Variable rent leases require careful data management to track the variables that affect the lease payments and to calculate the lease liability and right-of-use asset accurately. This can be a challenge if the lease agreement is complex or if the variables that affect the lease payments are not well-defined.<\/li>\n<li><strong>Compliance:<\/strong> Variable rent leases can be complex to comply with accounting standards and regulations. This is because the accounting treatment of variable rent leases can vary depending on the type of lease, the index or rate that the rent is tied to, and the amount of usage of the leased asset.<\/li>\n<\/ul>\n<p>Despite the challenges, it is important to properly account for variable rent leases. This is because variable rent leases can have a significant impact on a company&#8217;s financial statements. By carefully managing the challenges of accounting for variable rent leases, companies can ensure that their financial statements are accurate and that they are in compliance with accounting standards and regulations.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Best_practices_for_recording_and_tracking_variable_rent_lease_data\"><\/span>Best practices for recording and tracking variable rent lease data<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"1_Identify_all_the_variables_in_your_lease_payments\"><\/span>1. Identify all the variables in your lease payments<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It\u2019s not enough to capture the fact that a lease obligation has a variable component. Different variable payment structures qualify for different accounting treatments. And to further complicate things, under the US standard (ASC 842) variable leases may be treated one way, whereas under the international standard (IFRS 16) variable leases may be treated differently. If you must comply with both, you may need to apply two different accounting treatments to the same lease. That\u2019s why it\u2019s so important to understand and capture every parameter that affects how lease payments change over time.<\/p>\n<p>You\u2019ll need the advice of your accounting partners to decide how you\u2019ll treat different variable payment scenarios as well as what practical expedients you plan to take. Then you can work out what data you\u2019ll need to create the calculations.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"2_Isolate_every_variable_in_your_lease_management_and_accounting_system\"><\/span>2. Isolate every variable in your lease management and accounting system<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Create separate line items for every variable; don\u2019t make the mistake of combining them with the overall obligation that\u2019s being increased over time. If everything is lumped together, when a remeasurement occurs you\u2019ll be forced to go back and spend a lot of time making manual accounting adjustments.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"3_Creating_the_data_right_structure\"><\/span>3. Creating the data right structure<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It\u2019s essential to create the right relationship between your fixed rent components and your variable payment components in your lease system.<\/p>\n<p>On one hand, you need to connect them so that you can combine them for payment purposes. But you must also be able to treat them separately as needed for accounting purposes that change over time.<\/p>\n<p>When a remeasurement event occurs, you\u2019ll be in the best position to make a smooth and easy transition to a different accounting treatment.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Visual_Lease_accommodates_complex_lease_structures_and_makes_your_workflow_simple\"><\/span>Visual Lease accommodates complex lease structures and makes your workflow simple<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>It\u2019s no secret that accounting for variable rent leases (or any leases that have a variable payment component) is complicated. That was true even before the new lease accounting standards, but under ASC 842 and IFRS 16 the complexity has increased exponentially. Plus, with leases more visible on the balance sheet and making a bigger impact on your financial reporting, the stakes are higher and you need to be sure you get it right.<\/p>\n<p>That\u2019s why Visual Lease has taken what we\u2019ve learned working with the early adopters and built best practices into our <a href=\"https:\/\/visuallease.com\/software\/lease-accounting\/\">tools that adapt to the complexities of variable rent leases<\/a>. With our smart and flexible data architecture and the ability to change accounting treatments automatically, you not only get to compliance fast, but you do it right so you avoid re-work later. Your Day 2 workflow is simple and efficient<\/p>\n<p><span style=\"font-weight: 400\">Ready to see how it works? <\/span><a href=\"https:\/\/visuallease.com\/schedule-demo-ub\/\"><span style=\"font-weight: 400\">Request a demo<\/span><\/a><span style=\"font-weight: 400\"> now.<\/span>[\/vc_column_text][\/vc_column][\/vc_row][vc_row type=&#8221;in_container&#8221; full_screen_row_position=&#8221;middle&#8221; scene_position=&#8221;center&#8221; text_color=&#8221;dark&#8221; text_align=&#8221;left&#8221; class=&#8221;faq_vl_cs&#8221; overlay_strength=&#8221;0.3&#8243; shape_divider_position=&#8221;bottom&#8221; shape_type=&#8221;&#8221;][vc_column column_padding=&#8221;no-extra-padding&#8221; column_padding_position=&#8221;all&#8221; background_color_opacity=&#8221;1&#8243; background_hover_color_opacity=&#8221;1&#8243; column_shadow=&#8221;none&#8221; column_border_radius=&#8221;none&#8221; width=&#8221;1\/1&#8243; tablet_text_alignment=&#8221;default&#8221; phone_text_alignment=&#8221;default&#8221; column_border_width=&#8221;none&#8221; column_border_style=&#8221;solid&#8221;]\r\n    <div class=\"col span_12 section-title text-align-center extra-padding\">\r\n\t\t<h2>\n<h2>Frequently Asked Questions<\/h2>\n<\/h2><\/div><div class=\"clear\"><\/div><div class=\"toggles \" data-style=\"minimal\"><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"What_are_the_different_types_of_variable_rent_leases\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What are the different types of variable rent leases?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]There are two main types of variable rent leases:<\/p>\n<ul>\n<li><strong>Index-based leases: <\/strong>These leases tie the rent payments to an external index, such as the Consumer Price Index (CPI) or the London Interbank Offered Rate (LIBOR). The rent payments will increase or decrease in line with the index.<\/li>\n<li><strong>Usage-based leases:<\/strong> These leases tie the rent payments to the amount of usage of the leased asset. The rent payments will increase or decrease depending on how much the asset is used.<\/li>\n<\/ul>\n[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"How_are_variable_lease_payments_treated_in_accounting\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>How are variable lease payments treated in accounting?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]Variable lease payments are handled differently based on lease type. For operating leases, they\u2019re recognized as expenses when incurred. In finance leases, they become part of the lease liability and noted as interest expense over the lease term.<\/p>\n<p>Variable rent components tied to throughput, usage, or output \u2014 such as machine hours or production volume \u2014 are handled differently. Under ASC 842, these contingent amounts are not included in the initial lease liability or right-of-use asset because they depend on future activity levels. Instead, they are expensed as incurred, with Visual Lease isolating these payments for accurate tracking and compliance.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"What_are_variable_lease_payments_under_IFRS_16\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What are variable lease payments under IFRS 16?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]In IFRS 16, variable lease payments are payments influenced by events beyond time, like asset usage or market changes. These include percentage-of-sales payments, usage thresholds, or market price adjustments.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"Are_variable_lease_payments_included_in_lease_liability\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>Are variable lease payments included in lease liability?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]Yes, variable lease payments must be included in the lease liability and asset. They\u2019re added initially if known, or later when event-dependent.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"Whats_the_difference_between_variable_and_fixed_loans\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>What\u2019s the difference between variable and fixed loans?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]Fixed loans maintain a constant interest rate, ensuring steady payments. Variable loans have rates that change due to market shifts, impacting monthly payments.[\/vc_column_text]<\/div><\/div><div class=\"toggle default\"><h3><span class=\"ez-toc-section\" id=\"Which_features_track_co-working_memberships_as_short-term_leases\"><\/span><a href=\"#\"><i class=\"icon-plus-sign\"><\/i>Which features track co-working memberships as short-term leases?<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3><div>[vc_column_text]Co-working memberships often function as short-term or highly flexible leases, with variable payment structures tied to usage (such as hourly, daily, or monthly access). Visual Lease tracks these agreements by:<\/p>\n<ul>\n<li>Separating co-working memberships into distinct short-term lease categories to simplify accounting treatment under ASC 842 and IFRS 16.<\/li>\n<li>Applying practical expedients to exclude short-term co-working leases from balance sheet recognition when appropriate.<\/li>\n<li>Capturing usage-based variables (such as seat utilization or meeting room hours) to calculate accurate variable payments.<\/li>\n<li>Allowing side-by-side reporting of traditional office leases and co-working memberships for full portfolio visibility.<\/li>\n<\/ul>\n[\/vc_column_text]<\/div><\/div><\/div>[\/vc_column][\/vc_row]\n","protected":false},"excerpt":{"rendered":"<p>[vc_row type=&#8221;in_container&#8221; full_screen_row_position=&#8221;middle&#8221; scene_position=&#8221;center&#8221; text_color=&#8221;dark&#8221; text_align=&#8221;left&#8221; overlay_strength=&#8221;0.3&#8243; shape_divider_position=&#8221;bottom&#8221;][vc_column column_padding=&#8221;no-extra-padding&#8221; column_padding_position=&#8221;all&#8221; background_color_opacity=&#8221;1&#8243; background_hover_color_opacity=&#8221;1&#8243; column_shadow=&#8221;none&#8221; column_border_radius=&#8221;none&#8221; width=&#8221;1\/1&#8243; tablet_text_alignment=&#8221;default&#8221; phone_text_alignment=&#8221;default&#8221; column_border_width=&#8221;none&#8221; column_border_style=&#8221;solid&#8221;][vc_column_text] When ASC 842 and IFRS 16 were first announced, there was&#8230;<\/p>\n","protected":false},"author":3,"featured_media":1493,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[170],"tags":[185,186],"company_size":[],"company_portfolio_size":[],"company_industry":[],"case_study_topic":[],"class_list":["post-1492","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lease-accounting","tag-asc-842","tag-ifrs-16"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts\/1492","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/comments?post=1492"}],"version-history":[{"count":0,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/posts\/1492\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/media\/1493"}],"wp:attachment":[{"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/media?parent=1492"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/categories?post=1492"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/tags?post=1492"},{"taxonomy":"company_size","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_size?post=1492"},{"taxonomy":"company_portfolio_size","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_portfolio_size?post=1492"},{"taxonomy":"company_industry","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/company_industry?post=1492"},{"taxonomy":"case_study_topic","embeddable":true,"href":"https:\/\/visuallease.com\/wp-json\/wp\/v2\/case_study_topic?post=1492"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}