An accounting method that averages total lease payments evenly over the lease term, resulting in a level rent expense each period regardless of actual cash payments, required under both ASC 842 and IFRS 16.
Under GAAP, rent expense must be recognized on a straight-line basis over the lease term, even if actual rent payments vary due to escalations, free rent periods, or stepped schedules. For example, a 5-year lease with 6 months free rent followed by increasing rents creates a straight-line rent that differs from cash rent each period — resulting in a deferred rent asset or liability on the balance sheet. Lease abstracts must capture the full rent schedule, free rent periods, and term dates with precision to enable accurate straight-line rent calculations. This is a primary driver of demand for machine-readable lease abstraction in corporate real estate departments.
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