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.
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