An entity agrees to enter into a new lease arrangement with a new lessor. As an incentive for entering into the new lease, the lessor agrees to pay the lessee’s relocation costs. The lessee’s moving costs are €1,000. The new lease has a term of 10 years, at a fixed rate of €2,000 per year.
The lessee recognises relocation costs of €1,000 as an expense in Year 1. Both the lessor and lessee would recognise the net rental consideration of €19,000 (€2,000 for each of the 10 years in the lease term, less the €1,000 incentive) over the 10 year lease term using a single amortisation method in accordance with SIC-15.
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