If you need to record a rent holiday, rent free period or other discount on an Agreement after it has commenced, you can do this through a Variation Event. In this guide, we'll walk you through the steps of how to record this.
Video Tutorial: How to Add a Rent Holiday or Discount after Commencement
Check out this video guide on how to add a Rent Holiday or Discount to your Agreement, or keep reading below.
Add a Rent Holiday / Discount after Commencement
To add a Rent Holiday or Discount to your Agreement:
- On the relevant Agreement, click “Action”, then “Create / Edit Events”.
- This will take you to the Events page of the Agreement creation process. Scroll to the Variation section and click “Edit”.
- Using the calendar tool or text field, enter the date you agreed to the terms of the Rent Holiday or Discount. Click “Add”.
Please note: We recommend that you do not edit other Event information while adding this Variation event. If you alter Events that were known at the commencement of the Agreement, this may impact your IFRS 16 Opening Balances for this Agreement. This warning also applies to Events that are scheduled during a period already factored into IFRS 16 reporting.
- Click “Done” at the top or bottom of the page to return to the Agreement Timeline.
- You'll now see a new icon on the Agreement Timeline representing the Variation Event. At Step 1, click “Start Event”.
While you can add Events on a date that is within a locked period, you cannot complete these Events on the Agreement Event Timeline. If your Variation Event is within a locked period, you'll need to ask a user with the Administrator permission in your Organisation to edit the Lock Date before you can complete the Event. Check out this article for more information.
- At Step 2, select “Yes, there are variations to the agreement”, then click “+ Add variation”.
- Navigate to the “Rent & Payment” page of the Agreement creation process.
- Scroll down to the Holiday / Discounts section and click “Add a new holiday / discount”.
- Add the details of the Rent Holiday / Discount, including:
- A Description of the Holiday / Discount
- The Effective Date of the Holiday / Discount (this is the date on which any remeasurement will appear in the IFRS 16 reports
- The Type of Holiday / Discount (whether it applies until the Agreement ends, or occurs over a specified date range
- If “Permanent”, record when the period begins in the “Start Date” field
- If “Date Range”, record when the discount period begins in the “Start Date” field and when the discount period ends in the “End Date” field
- The Amount Type (whether you want to record the discount as a percentage or dollar amount)
- The Amount
- If percentage, record the amount that is discounted from the regular rent. E.g., if your rent is discounted by 75%, enter “75” in the field
- If dollar, record the amount that is removed from every rent payment that occurs during the discount period. E.g., if each rent payment during the discount period is discounted by $500, enter “500” in the field.
The system will apply a different logic depending on whether you set the “Amount Type” as dollar or percentage.
When selecting the dollar type, the system will deduct the recorded amount from each and every rent payments that occur between the Start and End Dates of the Holiday/Discount.
When selecting the percentage type, the system will deduct the amount from all rent payments that occur between the Start and End Dates of the Holiday/Discount (inclusive). For any proportionate periods, this will pro-rata.
- Make sure you click “Add” to save the Holiday / Discount. Note that Effective Date of the Holiday / Discount must be before the Start Date, otherwise, you'll be unable to click “Add”.
If your Payment Effective Date within a locked period? You'll need to ask a user with the Administrator permission in your Organisation to edit the Lock Date before you can add the payment. Check out this article for more information
- Click “Done” at the top or bottom of the page to return to the Agreement Timeline.
- On the Agreement Timeline, click “Next” at step 2 of the Variation Event.
Please note that adding an IFRS 16 Component Payment such as a Holiday / Discount won't produce a text note summarising the change made in the Variation Event. You may like to add your own Custom Event Note to record details of the Holiday / Discount that was added through the Variation Event.
- Upload any supporting Documentation, or select “No Documentation”, then click “Next”.
- Click “Complete”. You'll see a certification noting that Event has been completed, and the Variation Event icon will turn green.
You have now successfully added a rent holiday / rent discount to your Agreement.
Validating your Rent Holiday / Discount was Added Correctly
If you use Nomos One for IFRS 16 Reporting, you can validate that the Rent Holiday or Discount was added correctly using the Journal Report. To do this, run the Journal Report over the Effective Date of the Rent Holiday or Discount, and you should see “Remeasurement of Lease Liability” journal lines. If you run the report over the Start Date and End Date of the One-off Payment, you should see rent payment journal lines that display a reduced rent amount.
Nomos One does not provide or purport to provide any accounting, financial, tax, legal or any professional advice, nor does Nomos One purport to offer a financial product or service. Nomos One is not responsible or liable for any claim, loss, damage, costs or expenses resulting from your use of or reliance on these resource materials. It is your responsibility to obtain accounting, financial, legal and taxation advice to ensure your use of the Nomos One system meets your individual requirements.