If a lease is structured so that the lessee pays a set rental payment each period plus an additional amount based upon usage or a change in an index, these contingent rental payments should be expensed when the contingency is likely
to be met.

Question

Quizplus · Accepted Answer

Contingent rental payments are expensed in the period in which the contingency is met and the additional payment becomes payable, rather than being accounted for upfront in the lease liability and right-of-use asset.

If a Lease Is Structured So That the Lessee Pays