How to Record a Holdover or Month to Month Agreement

Updated at July 27th, 2024

Table of Contents

Options to record Holdover or Month to Month Agreements The pros and cons of each option Decided to extend your Agreement for the Holdover or Month to Month period? Decided to create a new Agreement for your Holdover or Month to Month period?

Options to record Holdover or Month to Month Agreements

There may be times when you're yet to negotiate a new term with your landlord and you enter into Holdover or change your lease term to be Month to Month. These periods can be for an unknown period of time and may change the way you're accounting for an Agreement under IFRS 16. You can either represent these periods by:

Option One: Extending your existing Agreement for the anticipated Holdover or Month to Month period/s; or
Option Two: Expiring your existing Agreement at its pre-scheduled Expiry Event or Renewal Event, creating a new Agreement to reflect the anticipated Holdover or Month to Month period/s, and if a new term is negotiated, creating another new Agreement to represent those new terms

We appreciate that neither of these methods are ideal, but unfortunately every organisation's Holdover/Month to Month setups seem to be different, so formulating a solution is inherently complex. We're reviewing what we can do to make this easier for you - so please watch this space!

The pros and cons of each option

Due to the complexity of representing Holding Over or Month to Month arrangements, we recognise that each option has pros and cons. We recommend reviewing these before you select which option to use.

	Pros	Cons
Option One	Everything is contained within the same Agreement Entering monthly Renewals gives an accurate representation of the Month to Month arrangement For Holding over periods, you just need to enter a single Renewal Event and associated variations, then no maintenance is required until circumstances change	Recording the period as multiple Renewal Events for Month to Month means having to complete Events to maintain monthly periods Monthly Renewals may result in a residual Right of Use Asset due to changes being made one day before Expiry Several steps are involved to set up new Events (Variations and Renewals) on the Agreement Timeline, including Rent Holidays or Discounts, Variable Rent Payments etc Recording the period as a single Renewal Event means an estimate is required for how long the Holdover will be
Option Two	Calculations will be accurate as original Agreement will fully expire and Holdover Agreement will have no lease liability calculated Clean management of Holdover period, including rent changes New Agreement doesn't need to have complete information, as only relevant information to the Holdover needs to be added	Have to manage multiple Agreements for a single lease contract

Decided to extend your Agreement for the Holdover or Month to Month period?

Check out this article for the steps and more information on Option One.

Decided to create a new Agreement for your Holdover or Month to Month period?

Check out this article for the steps and more information on Option Two.

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Options to record Holdover or Month to Month Agreements

The pros and cons of each option

Decided to extend your Agreement for the Holdover or Month to Month period?

Decided to create a new Agreement for your Holdover or Month to Month period?

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