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Entity leases stalls in a market to tenants as the lessor. Lessees generally repay a fixed amount (e.g. $5k per month) that increases by a fixed percentage (e.g. 4%) each year.
AASB 16.81 states that the lessor should recognise the lease payments (i.e. revenue) on a straight line basis or another systemic basis.
I would like to clarify if the entity is required to recognise revenue on a straight-line basis for the entire lease term (e.g. 5 years).
If so, Am I right in presuming they will need to recognise accrued revenue (asset) for the difference between the accrued amount and the straight lined revenue.
Alternatively, are they permitted to recognise the revenue on an accruals basis (e.g. year 1 = $60k, year 2 = $60k x 1.04% = $62.4.k).

Thanks for your help

Straight line basis is not compulsory, u can use another systematic method. In ur case, the increase is probably due to inflation so u can justify that the yr 1 income is 60k and year 2 income is 62.4k and so on.

Yes your understanding is correct, the difference between what is to be received in cash and what is recognized in the income statement is recognized as an asset on the balance sheet (you will need to bifurcate it between current and non current as well) and this will automatically decline (by way of adjusting the difference between cash received and amount recognized in the income statement) by the end of the lease term.

so you don't agree with Irfan Mustafa?

Nope, when it comes to other systematic basis you have to come up with an alternative systematic basis (same as if you are not following straight line depreciation you have to come up with an alternative). Where escalation clauses are built in a contract these have to be straight lined.

The alternative basis is for when you have other basis that are clearly more faithful than the straight-line basis.

In your cases, the revenue should be recognised on the straight-line basis, which means the revenue recognised for each year is the same, regardless of the escalation in price in the year two onwards.