When IFRS 16 took effect in January 2019, most of the headlines were about tenants. Lessees had to bring almost all of their leases onto the balance sheet as right-of-use assets and lease liabilities, and familiar metrics such as EBITDA and gearing ratios changed with them. For landlords, the standard looked like a non-event. Lessor accounting was carried forward from IAS 17 almost unchanged.
Seven years on, the lessor rules still deserve more attention than that. They did not change much, but they are applied to every lease, every month. Straight-line rent, rent-free periods, fit-out contributions, renewals and turnover rent all have specific treatments, and every one of them depends on lease data that lives in Yardi Voyager. Yardi is very good at turning a well-built lease into correct accounting entries. The work is making sure each lease is built so that it can.
Five areas to get right
Where IFRS 16 meets your lease data
These are the five areas we review first when a client asks us to look at lease accounting in Yardi.
Build the charge schedule so the straight-line calculation can trust it
Under IFRS 16, a lessor recognizes operating lease income on a straight-line basis over the lease term, unless another systematic basis better reflects how the benefit is used. A ten-year office lease with fixed annual steps and a three-month rent-free period produces the same income in every month, even though the cash billed varies a great deal. The difference sits on the balance sheet as an accrued rent receivable.
Voyager's Commercial module straight-lines rent for IFRS, either lease by lease or as a mass calculation across the portfolio, and produces the journal entries and an exception report. That calculation can only work with the rent steps it knows about. Every fixed escalation should be in the lease from the day it is signed. A step added by amendment when it falls due is missing from every straight-line calculation run before then.
Spread incentives over the lease term, not the month they are paid
A fit-out contribution, a cash payment to secure a tenant, or a landlord's agreement to cover the tenant's relocation costs all reduce rental income over the lease term. They are not an expense in the month the money leaves.
In Yardi, the cleanest approach is to record each incentive against the lease it belongs to, through a dedicated balance sheet account and charge code, so it amortizes alongside the rent. When an incentive is paid through accounts payable without a lease reference, the cash is right and the property is right, but nobody can show which lease the payment belongs to or how much of it remains to be amortized.
The real test of lease accounting is whether the straight-line balance on any one lease can be rebuilt from the lease, the incentives and the amendments in the system. When that history lives in Yardi, the answer takes minutes.
Artisan Solutions · Specialist Yardi ConsultingTreat lease modifications as new leases, and forgiven arrears separately
IFRS 16 requires a lessor to account for a modification to an operating lease as a new lease from the date the modification takes effect. Any accrued straight-line receivable or unamortized incentive from the original lease is carried into the new lease and spread over its remaining term. It is not written off. A reduction in future rent agreed with a struggling tenant is a modification, and so is an early renewal at a new rent.
Forgiving rent that has already been billed is different. In 2022 the IFRS Interpretations Committee confirmed that amounts already recognized as an operating lease receivable fall under IFRS 9, so forgiving them is a derecognition of that receivable, not part of the new lease. A concession that covers both past arrears and future rent needs both treatments, and the Yardi entries should keep them apart.
Yardi stores every lease modification, from expansions and contractions to relocations and renewals, so the original terms and the new ones stay on the record. That is exactly the trail an auditor needs. The risk comes from shortcuts: a renewal keyed as a brand new lease, with the old straight-line balance left stranded, or a rent concession booked as a one-off credit with no change to the schedule. Agree with the leasing team which events must go through a formal amendment in Yardi, and make the straight-line recalculation part of processing it.
Separate lease income from service income and turnover rent
Not everything a landlord bills is lease income. A lessor must account for non-lease components separately, allocating the consideration under IFRS 15, and services such as cleaning, maintenance and common area repairs are generally non-lease components. Recoveries of insurance and property taxes are not, because they do not transfer a service to the tenant. Turnover rent based on a tenant's sales is a variable lease payment. It is recognized as income in the period the sales occur and stays out of the straight-line calculation.
Yardi already keeps these streams apart if the charge codes are set up to do it. Each code should map to the correct income account, and turnover rent should run through Voyager's sales tracking and percentage rent calculations rather than a manual invoice. When a single "rent" code is used for everything, the income statement may still add up, but the split has to be rebuilt in spreadsheets every year.
Do not forget the leases where you are the lessee
Many real estate groups are lessees too. Ground leases, head leases, car park leases and the group's own office leases all fall under the lessee model, and each one needs a right-of-use asset and a lease liability on the balance sheet. A right-of-use asset that meets the definition of investment property is presented as investment property.
These leases are often tracked in a spreadsheet beside Yardi, which works until the first remeasurement. Yardi Corom, Yardi's lease accounting solution for occupiers, automates the lessee calculations and journal entries under IFRS 16 and ASC 842. Whichever tool you use, the payable side of a ground lease should reconcile to the lease liability schedule every month, not just at year-end.
Year-end checklist
What to review in Yardi before the auditors arrive
On a well-maintained database, these checks are quick to run and give the audit team a clear starting point.
- Reconcile the straight-line receivable in the GL to the lease-level straight-line report for every property
- Review the straight-line exception report and clear every item on it
- Sample leases with fixed escalations and confirm every future step is in the lease
- Match each incentive to a lease, and check the unamortized balance
- Review every amendment in the year and confirm the straight-line schedule was recalculated from its effective date
- Separate any forgiveness of billed arrears from concessions on future rent
- Check that turnover rent is excluded from straight-lining
- Assess the recoverability of tenant receivables for tenants in arrears or at risk
The rules that shape your Yardi setup
Closing thought
Good accounting starts in the lease record
IFRS 16 asks landlords for discipline more than judgment. The standard is settled and the policies are well understood. What separates a smooth year-end from a painful one is whether the lease data in Yardi tells the whole story: every step, every incentive, every amendment, recorded when it happened and against the lease it belongs to.
Yardi Voyager is built to hold that story and turn it into accurate entries month after month. Finance teams that invest in clean charge schedules and a firm amendment process find that the straight-line report, the GL and the disclosure notes agree without a spreadsheet in between. It is the same principle behind reconciliation in Yardi Bank Book and better leadership reporting: get the source data right once, and every output benefits.
If your next audit is approaching and you want a second pair of eyes on lease accounting in Yardi, talk to us. We work exclusively in Yardi.