Question

Discuss how variable or contingent lease payments (i.e. those based on revenues, profits, CPI indexes, etc.) are handled in accounting for leases.

Answer 1

EXPLANATION :

New standard has been issued by (IASB) and (FASB) the for lease payment accounting but there is no major changes made in the accounting for variable lease payment in the new accounting standards issued.

Accounting for variable lease payments.
The contingent lease payment are considered as expenses in periods but there is always a exception for Neet based on payments like leap or gap and these rates are calculated in the beginning of the period for contingent lease payment.
The same accounting treatment is done based on CPI index.

1. Accounting treatment of variable lease payment based on Revenue factors.

Under the new standard issued, the variable contingent lease payment will be treated differently. The entities with higher variable lease payment will represent less liabilities in their financial statements as compared to fixed rental payments.

2. Accounting treatment based on CPI index.    A variable lease payments which will be calculated as per index or CPI will be a part of lease contract, if it will not be possible to calculate future inflation.
The contingent liabilities amount is calculated based on CPI index.