Straight-Line Reporting for Stepped Rent
Real Property / Costs / Cost Administrator
Straight-Line Reporting for Stepped Rent
Stepped rents increase by predetermined amounts at fixed points over the life of the lease. Straight-line accounting requires base rent payments to be reported evenly for the entire lease period. The application takes the cost records you enter for the stepped rent, and calculates the straight-line rent.
For example, if you have a lease with monthly base rents for year one of $10,000, and for year two of $20,000, the cash flow report will present a consistent value of $15,000 for each of the two years. Since the actual payments will differ from year to year, there will be a deferred part that will become 0 by the time the lease expires.
The following table shows this scenario and the calculations the application uses:
| Year 1 | Year 2 | Cumulative Totals | Calculation | ||
|---|---|---|---|---|---|
| A | Yearly Base Rent | $10,000 | $20,000 | ||
| A1 | Number of Payments | 12 | 12 | 24 | |
| A2 | Base Rent - Cumulative Value | $120,000 | $240,000 | $360,000 | (A x A1) varies per year |
| B | Straight-Line Rent (monthly value) | $15,000 | $15,000 |
A2 cumulative / A1 Cumulative |
|
| C | Differential | ($5,000) | $5,000 | (A - B) varies per year | |
| D | Cumulative Differential | ($60,000) | $60,000 | (C x A1) varies per year |