Should office rent expense be recognised?

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sgaccountant
Posts: 9
Joined: 25 Feb 2022, 10:25

Should office rent expense be recognised?

Post by sgaccountant »

Hi All,

Need your advice regarding this scenario:

Related companies A and B share the same office.

Office rental contract with landlord is signed with A only.

A pays the office rent to the landlord and bills B for usage of office as a way to allocate costs in budget.

However, from this year onwards, A no longer bills B for usage of office as budget is now directly tracked from A.

Question on recognition of office rent expense:

Is it right that B should no longer recognise rent expense due to no legal liability to pay office rent as contract is not signed with B?

OR

Must A bill B as B should recognise office rent as B is using the office?
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Marek Muc
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Re: Should office rent expense be recognised?

Post by Marek Muc »

sgaccountant wrote: 20 Jul 2022, 17:39 Is it right that B should no longer recognise rent expense due to no legal liability to pay office rent as contract is not signed with B?
there is a policy choice really:
1. don't recognise anything
2. recognise the expense along with imputed contribution from the parent via related entity (DR expense / CR equity)
sgaccountant wrote: 20 Jul 2022, 17:39 Must A bill B as B should recognise office rent as B is using the office?
it depends on local law really, tax law in particular
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