Lease liability interest

[Descy]

Hi there! So my company leases an office for the period 01/04/xxx0 until 31/03/xxx1 and pays the rent in advance annually. The company thought this time failed to pay on time i.e 01/04/xxx0 and instead paid 3 months after. Should recognise an interest for these 3 months?

[JakobLavrod]

Yes, your debt should keep accruing interest, even if it was paid later right?

[Descy]

It is my understanding that for the first period the NPV of the rent payment would not have any interest... The forst period covers a whole year so even if they paid 3months after it is still in my first period with no interest. So shall I calculate an interest using the same rate implicit for only these 3 months now? Will that need to change my table schedule for the lease liability?

[JakobLavrod]

I might be completely misunderstanding you, but would it not be the reverse, early on, when the liability is large, that is the point when it accrue the most interest? In this case, interest is assumed to be accrued in each period according to the effective interest method (as in IFRS 9), independent on how it is named in the contract.

[Marek Muc]

Will you pay interest on that overdue payment? If not, then you don't need to recognise any additional expense or adjust the lease liability schedule