Under ITB guidance, if tenants receive rent concessions, the entity would

Under ITB guidance, if tenants receive rent concessions, the entity would

• A. Directly offset revenue and the corresponding account receivable
• B. Record as a separate liability
• C. Recognize revenue in the current period
• D. Postpone revenue recognition until the lease ends

Answer: (A)

Rent concessions reduce the amount the entity is entitled to for the period, so they are netted against both the revenue earned and the related accounts receivable. In practice, this means recognizing the net amount the landlord expects to collect and reducing the receivable by the same concession. For example, if rent billed for a period is 100 and a concession of 20 is granted, you would reduce both revenue and the accounts receivable by 20, recognizing 80 as the revenue earned and carrying 80 as the receivable (instead of 100). This reflects the actual consideration the entity expects to receive and avoids overstating revenue or creating a separate liability.

Rent concessions reduce the amount the entity is entitled to for the period, so they are netted against both the revenue earned and the related accounts receivable. In practice, this means recognizing the net amount the landlord expects to collect and reducing the receivable by the same concession.

For example, if rent billed for a period is 100 and a concession of 20 is granted, you would reduce both revenue and the accounts receivable by 20, recognizing 80 as the revenue earned and carrying 80 as the receivable (instead of 100). This reflects the actual consideration the entity expects to receive and avoids overstating revenue or creating a separate liability.