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Accounting for rent free balance on disposal

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Company owns a building. It sets up a 5 year operating lease to a tenant offering a 3 month rent free period. The building is then sold to a third party (with the operating lease included) towards the end of the first year of lease. On disposal what is the accounting treatment of the rent free period balance (first few months accounting DR rent income (monthly rent adjusted to reflect incentive) CR deferred rent/rent free account)? Does it just get written off against any profit/loss on disposal?

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By paul.benny
16th Dec 2021 11:41

Yes

If you've accounted for the rent-free period in accordance with FRS102 para20.25A, you'll have a "prepayment" that must be written off.

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By andrew1211
16th Dec 2021 12:11

.

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