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Incentives
Lease incentives are benefits received from the lessor. Under FRS 102, incentives reduce the ROU Asset value, not the lease liability.
Types of Incentives
Common incentives:
Rent-Free Periods
Initial period with no rent payments.
Fit-Out Contributions
Cash or works provided by landlord.
Cash Payments
Direct cash payments to sign the lease.
Impact
Incentives reduce the ROU Asset:
FRS 102 Reference: FRS 102.20.13-20.14
Incentive Impact
Lease Liability: £100,000
Incentive Received: (£10,000)
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ROU Asset: £90,000