Variable lease payments, called contingent rent in FAS 13 and IAS 17, are rent whose amount is not known at the inception of the lease. This can include rents based on percentage of sales, floating interest rates, passthrough of taxes, inflation adjustments, and the like. It is also used for rent paid when the lease is in month to month status. Variable lease payments are not part of the minimum lease payments, so they do not affect the classification of a lease as finance or operating or any of the balance sheet and income statement accounts of a finance lease, nor rent leveling for an operating lease. They are expensed as incurred.
You may record variable lease payments on a lease on the Variable tab. Enter the amount of the variable payment, which can be positive or negative (a negative number indicates that rent was estimated based on a rate, such as an interest rate, in effect at the inception of the lease, and the rate later decreased). Enter the date the variable payment is made. Normally, this will be the date of a rent payment; if you specify a date when no rent is scheduled to be paid, EZLease finds the closest rent payment date and offers it as an option. However, since variable payments may happen out of cycle with the regular payments, you are permitted to keep the date you entered.
EZLease permits you to record seven types of variable payments. The types are labeled CPI, (Excess) Usage, Maintenance, % of Sales, and Taxes, plus two columns that you can define yourself in System Options. If you don't specify a meaning for them, they are listed simply as Var Pmt1 and Var Pmt2.
Variable payments are reported on the detail income statement/balance sheet report and the journal entries report, but not on the compact income statement/ balance sheet report. The text output form of the detail report shows only the combined variable payments, not the individual types; they are shown separately on spreadsheet output, and on the journal entries report.
In ASC 842/GASB 87, variable payments based on an index or rate become lease payments which are recorded like other rent if the lease is revised for other reasons. If that happens, remove any future scheduled variable payments from the Variable table when you put them into the rent.
In IFRS 16, variable payments based on an index or rate are made part of the regular rent whenever the cash flows change. Immediately revise the lease, setting the rent for the present and the future to include the change.
Click this button to get a window to enter the same variable payments for multiple rent payment dates. Enter the appropriate variable payment amounts per payment. Enter the start and end dates; a variable payment record is created for each regular payment date during that period. If there is already a variable payment record with a matching date, you have the option to replace it, skip that date, or be prompted to decide for each match.
You may also enter variable lease payments (contingent rent) by uploading an Excel spreadsheet. (Using an XML spreadsheet is permitted, but you must have Excel installed on your computer.) To do this, select the File menu, Variable Lease Payments Upload. The spreadsheet must be in the following form:
Column A: Lease number
Column B: First payment date
Column C: Last payment date (if blank, treated as single payment)
Columns D-J: Variable payment:
· D: CPI; E: Excess Usage; F: Maintenance; G: Percent of Sales; H: Taxes; I: Var Rent1; J: Var Rent2
If the date specified for the variable payment matches a previously scheduled variable payment date, you can specify whether the new variable payment should replace the existing amount, be added, or generate an error. If the date specified for the variable payment does not match a scheduled rent payment date, EZLease can automatically adjust the variable payment date to match a scheduled rent date; you can specify how close the dates must be for a match. If there is a larger difference, you can specify whether the variable payment should be treated as a separate payment, if it should be rejected as an error, or if EZLease should ask you for each occurrence how to treat it.
If you specify a first and last payment date, EZLease creates a variable payment record for each payment period of the current rent step. (Thus, if the rent step for that date is quarterly, a variable payment is created every three months for the period specified.) If the date is after the end date of the lease (for use with month to month leases), the payment period for creating multiple payments is considered to be monthly.
Blank lines at the top of the spreadsheet, and any columns beyond column J, are ignored. The first line can have headers or start immediately with valid data. Once EZLease reaches a blank line after data has started, the upload is considered complete.
A template for an upload file is stored in your EZLease installation folder, named “Variable payments upload template.xls”, which you can use for uploads.