Smoothing Liability

[fabulus]

These are 5 year leases and the rate is partly calculated on 5% of the business turnover so you may have 30m2 @R1000.oo=R30,000.oo and if your turnover is R300,000.oo you pay an additional R15,000.oo so your total rent is 45,000.oo but next month your turnover is 350,000.oo your rent will increase by R2,500.oo
It would also decrease proportionally if you have a bad month.

I don't know if all Old Mutual Properties follow this formula but Vincent Park in East London does. (My figures are thumbsucks though)

Hi guys I work for a firm which owns a small shopping complex. I have been following this thread and i shd say it has really interested me since I am having a small hick up with the smoothing process. A number of the tenants renewed their leases during the financial year 2011 and we are closing the books for 2011. the auditors want the smoothing schedule. what do i do with the tenants who renewed leases during the year. How do i bridge the gap between the old and new lease. Also some left during the year. Do i include the rentlas they paid in my smoothing? pliz help.

[eitnob]

Rental paid has nothing to do with smoothing/straight lining.

Renewal constitutes a new lease agreement, so you start a new straightlining calculation for each lease agreement. (unless this is a renewal that was likely at the initial inception, in which case the entire period +renewal period should is deemed to be the lease term)
People should be careful to paint a lease with to broad a brush, as there are several exceptions.

The OP mentioned a finance lease in his initial post. If he is in fact referring to a finance lease then most of the replies are not correct.
As for SME's smoothing may still be required unless the escaltion specifically refers to inflation. The extarct form the IFRS reads :

"(a) another systematic basis is representative of the time pattern of the user’s
benefit, even if the payments are not on that basis, or
(b) the payments to the lessor are structured to increase in line with expected
general inflation (based on published indexes or statistics) to compensate
for the lessor’s expected inflationary cost increases. If payments to the
lessor vary because of factors other than general inflation, then this
condition (b) is not met"