Question
Example: For a period of three years, a lessor leases a warehouse to a lessee. The leasing agreement stipulates that the annual lease payments will
Example: For a period of three years, a lessor leases a warehouse to a lessee. The leasing agreement stipulates that the annual lease payments will rise in line with the CPI (CPI). There is not a sizable finance element in the lease arrangement. Now, rather than recording the variable lease payments as rental revenue, the lessor may do so.
A lessor agrees to rent out a storage facility to a lessee for a period of three years. The annual lease payments are set to grow in accordance with the Consumer Price Index, as stipulated under the lease contract (CPI). The rental agreement does not contain a large finance provision of any kind. The lessor can now treat the variable lease payments as variable lease payments rather than as rental income when compiling their financial statements
Question: in this example do you see any issues with not recording the rental revenue? If so, what do you think may happen as far as fair and accurate reporting?
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