FAQ
Frequently asked questions about FRS 102 lease accounting.
General
When is FRS 102 Section 20 mandatory?
For periods beginning on or after 1 January 2026.
Does this affect all my leases?
Most leases. You can elect to expense short-term (≤12 months) and low-value assets.
Calculations
Which discount rate should I use?
OBR is simplest for SMEs. See Discount Rates topic for details.
How do I handle rent-free periods?
Treat as incentives - they reduce the ROU Asset, not the liability.
Payment Schedules
How do I manage scheduled rent increases (e.g., annual RPI increases)?
Lease102 supports stepped payment schedules. When creating or editing a lease, use the Payment Schedule Builder to define multiple payment periods with different amounts. For example, you can set £2,000/month for years 1-2, then £2,200/month for years 3-5. Each step can have its own start date and payment amount. If you have an existing lease with a scheduled increase that's already occurred, simply add multiple payment rows to reflect the historical and current amounts. The system will calculate the correct present value across all payment periods.
Can I make changes to payment amounts for periods before the current fiscal year?
Yes, you can edit historical payment amounts. Go to the lease detail page, click Edit, and modify the payment schedule. This is useful when correcting data entry errors or when a rent review has been finalised retrospectively. When you save, Lease102 will recalculate the entire amortization schedule from commencement date. Note: If you've already posted journal entries for prior periods to your ERP, you may need to post correcting entries. The Audit Trail will record all changes made to the lease for compliance purposes.
How do I handle a rent review that was agreed retroactively?
If a rent review was agreed after the effective date (e.g., a January increase agreed in March), edit the lease and update the payment schedule with the correct amounts and effective dates. Lease102 will recalculate the amortization schedule. For the catch-up period, the system will show the corrected interest and principal allocations. You can then export correcting journal entries for any periods already closed. FRS 102 requires lease modifications to be accounted for prospectively from the date of modification, but correcting data entry to reflect agreed terms is appropriate.
UK/Ireland Property Features
How do I handle Quarter Day leases?
Select the appropriate Quarter Day calendar (English, Scottish, or Irish) when creating the lease. The system will automatically generate payment dates based on traditional Quarter Days. Use Act/365 (XNPV) day count with daily compounding for accurate interest calculations across the irregular payment periods (which range from 87 to 97 days).
Should I combine service charges with rent?
You can use the practical expedient to combine fixed service charges with lease payments, which increases your lease liability. However, variable service charges must always be expensed separately when incurred - they cannot be capitalised. Apply your chosen policy consistently across all leases and document it in your accounting policies note for audit purposes.
How do I record a rent deposit?
Enter the deposit amount, date paid, expected holding period, and whether it earns interest. For non-interest-bearing deposits, Lease102 calculates the present value and adds the discount element to your ROU Asset. The discount unwinds as finance income over the lease term. Remember that rent deposits are accounted for under Section 11 (Financial Instruments), not Section 20 (Leases).