DTZ In Situ 2013-2014 - page 29

dTZ | In Situ 29
AlTernATIve SCenArIOS
The profit and loss account profiles in figure 2 are a result of
the following policies:
ReNt
fRee
fit out
deP’N
AccRue
dilAPs
scenario 1 no spread 10 years no
scenario 2 Spread 10 years Yes
scenario 3 Spread 7 years Yes
These three graphs break down the £50 million into its
component parts. The rates and service charge costs are the
same for each scenario.
ScenArIo 1
ScenArIo 2
ScenArIo 3
The large blue band in the middle represents the rent. The
rent is taken to the profit and loss account on a cash basis. In
scenarios 2 and 3, they both have the rent-free period spread
to the first market rent review. This treatment is the more
correct treatment but some companies do not spread the
rent-free period (typically those with large retail portfolios
who will argue that there is a significant turnover of leases so
the effect of spreading rent-free periods is not material).
The top two cost builds relate to depreciation (brown) and
dilapidations (blue).
so, accounting is not black and white. even though the
accounting profession has provided a plethora of rules and
regulations, there is still a lot of scope for interpretation.
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
PAul VeRNHAm
senior director, consulting
+44 (0)20 3296 2263
paul.vernham@dtz.com
dilapidations
Fit-out
rent
other revenue costs
rates