USA Lease Commencement Date for Deferred Rent Purposes

[Grant]

Hello,

I have a technical question.

We signed a new lease agreement with a landlord in Jan 2016. And according to the lease agreement, the lease commencement date will be sometime in Nov 2016 and the rent commencement date will be 6 months after the lease commencement date.

During Jan to November 2016, the landlord is conducting leasehold improvements to fit our needs for the space; meanwhile we hired an architect company for planning and design but the landlord is the one approving the planning and design and doing the improvements.

This is a turn-key construction.

The question comes up if the lease commencement date should be Jan 2016 upon signing the lease agreement (meaning we should record rent expense starting Jan 16) or it should be when the landlord turns the key to us.

Thanks so much for your help.

Grant.

 

[Pogo]

I think you would begin recording rent expense in November 2016, when the term of the lease begins. The date the lease is signed generally is irrelevant for accounting purposes.