Hi @PeregrineCapital

It's possible they have a "3% or the CPI whichever is greater" type clause in the lease in which case they would recognise the 3% at inception as the minimum step up, but AFAIK, AASB does not allow you to make assumptions about what the indexation might look like. Probably with good reason.

Just checked an accounting text and it has this...

You've lost me a bit there Peregrine. How would the pre/post AASB16 noticeably change based on the structure of the leases?

I agree with you about AASB16. Major PITA.

Yeah, I just think there are way too many leases with varying terms at various stages of maturity etc that the difference wouldn't be too significant. It is simpler, imo, to just work out the cash rent paid (reduction in property lease liability + interest expense on property leases (I think you have to use the slide above to get that interest cost) = cash rent) and adjust EBIT accordingly. You can also then just toss in a price escalator when you walk it forward. Bah AASB16 is the absolute dumbest thing to come out of accounting.

Nah, doesn't look to me like any shenanigans to me, just a business with very high fixed costs. Which is why it's so hard to cancel gym memberships.