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

Question

Quizplus · Accepted Answer

If the lease includes contingent rental payments, they should be expensed when it is likely that the contingency will be met. This is in accordance with the accounting standards for leases (ASC 842 or IFRS 16). Therefore, the statement is true.

If a Lease Is Structured So That the Lessee Pays