In this article we'll explain the different IFRS and Non IFRS Component Payments you can record on the Rent & Payments page of your Agreements.
IFRS Components
Any IFRS Payments recorded on your Agreement will appear on your IFRS 16 Reports.
Is 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 add, edit or remove any IFRS Component payments. Check out this article for more information.
Variable Rent Payments
The Variable Rent Payment function allows you to record any Rent payments that are based on a formula which means your rent is always changing e.g. Rent based on turn over from a preceding period.
As the nature of these payments are variable, they're not included in your IFRS 16 calculations (there is no way to predict the value of your Lease Liability or Right of Use Asset). You will however see reference to these payments as an expense entry when you run your Journals as we assume you'd still like to see this - as it's a rent payment.
Holiday/Discounts
The Holiday/Discount function allows you to record any rent holidays/discounts/rebates which adjust the Rent for a period of time - either in part or entirely. As these "payments" reduce the total rent owed, they will reduce your lease liability.
You can add in multiple holidays/discounts as they apply to your agreement. If there is a period of time when more than one rent holiday applies, please contact our support team so we can best reflect this in the system.
The IFRS 16 Engine will apply a different logic depending on whether you select the amount Type as dollar or percentage.
When selecting the dollar type, the system logic will deduct that Amount on any Rent Payment Dates that fall between the Start and End Dates of the Holiday/Discount.
When selecting the percentage type, the system logic will deduct the Amount for the period between the Start and End Dates (inclusive). For any proportionate periods, this will pro-rata.
Incentives
The Incentive payment line allows you to record any Incentives paid under your Agreement. Nomos One defines Incentives as positive payments from the Lessor to the Lessee e.g. Fit out contributions.
In IFRS 16 Reporting, Incentive payments impact the value of your Right of Use Asset if paid prior to Commencement. For Incentives paid at Commencement or during the lease term, this will increase your Lease Liability.
If you have an "Incentive" that is reducing your rent for a specific period or indefinitely, you should enter it in the field above under Holiday/Discounts.
Want to understand more about how Incentives are reflected in your Reports? Click here.
One-off Payments
One-off Payments is where you can capture payments that are not regularly made to the Lessor but are still a component of the lease. Adding in a One-off payment will increase your Lease Liability.
Deposit and Pre-payments
Deposits and Pre-Payments are added in using the same payment line, Select under Type whether you want to add in a Deposit or Pre-Payment.
Deposits
You can use the Deposit feature to record security deposits or bonds that the lessee pays to the lessor, that the lessor then holds for the lifetime of the agreement.
As these payments are held as a bond and don't contribute to Rent, they don't affect your IFRS 16 calculations. You will still see reference to any deposits at the start and end of an Agreement on your Journals so that you can manage your deposits in one system.
Pre-Payments
Pre-Payments are payments that are made before the due date of the fixed payment in your agreement that are assigned towards your rental obligations. These will reduce your Lease Liability in your IFRS reporting. Depending on the Effective Date entered and your transition method, you might also see an adjustment to your Right of Use Asset.
Pre-Payments work using a reducing balance method. The Amount will be deducted from the Premises Rent until the balance is reduced to $0.
We're currently experiencing an issue with Pre-Payments where any Pre-Payments added are applying from the Commencement Date of your Agreement, regardless of the Effective or Payment Date entered. The workaround to record a Pre-Payment with the correct reporting treatment is to:
- Add a One-off Payment for the amount you prepaid; and
- Enter a Rent Holiday/Discount(s) for the Period the Pre-Payment covers:
- For any full Payment Periods the Pre-Payment covers, enter a 100% Rent Holiday/Discount
- For any partial Payment Periods that the Pre-Payment covers, you must enter the Rent Holiday/Discount as a dollar ($) amount
E.g., If you've prepaid $1000 and your monthly Rent is $750, you would enter a 100% discount for one month and then a $250 discount for the following month (i.e. the partial payment period)
Using this workaround will account for the cash paid and reduce the rent payments for the same period, as if you used the Pre-Payment feature.
Non IFRS Components
Any payments entered as Non IFRS Components will only come through to the Contractual Payments by Period Report.
Variable Payments
If you have non-rent payments that are payable each rental period but have a variable nature to them, you can capture these using the Variable Payment function. Examples of payments you might like to add include: call-out fees, or usage payments such as after-hours air-conditioner or cleaning services.
When you add in a Variable Rent Payment we ask you to record the Estimated Value of the payment, per payment period. Once the value becomes known, you'll be able to record this on the Contractual Payments Report.
Repeating OPEX/Outgoings Payments
Any payments associated with OPEX/Outgoings can be entered in this field. You might have repeating payments you'd like to set up a payment line for, or you might have one-off expenses you need to capture - both can be done using this feature.
If you're using this feature to add in a one-off payment, leave the Frequency as Monthly, and use Date Range - with the End Date being the last day of the payment period selected under Frequency. This will ensure another payment is not triggered on the next payment date.
Repeating Payments
If you have a payment that you don't want to classify as OPEX/Outgoings you can add this into the Repeating payments field.
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.