What is ‘Fee Expense’
Rent expense it the cost incurred by a business to utilize realty as office, factory or storage space. Rent expense is a type of unflagging operating cost for a business, as opposed to a variable expense, that is liegeman to a one- or two-year contract between the lessor and lessee, with opportunities to renew.
BREAKING DOWN ‘Rent Expense’
Depending on the type of organization, rent expense can be a material portion of operating expenses or a negligible one. For retail questions that do not own their own property, rent expense is one of the main operating expenses along with hand wages and marketing and advertising costs. Manufacturing companies typically pass low amounts in rent expense as a percentage of total expenses. (Rent for assembling operations are included in factory overhead, while rent not tied to staging — i.e., administrative office space rent — is charged to operating expenses.) In honest estate, location is usually the most important factor in the price of rent. A retailer that wants to set up in a prime parade-ground with heavy foot traffic will have to pay higher lease expense than for a secondary location. A manufacturer that wants to sublet out factory or warehouse space close to ports or transportation lines in foremost metropolitan areas would face higher than average sublease costs. Rent expense consideration is balanced against the benefit of being in a prime region — for the retailer, and of being close to transshipment points — for the manufacturer.
Accounting Criterion for Rent Expense
Signet Jewelers Limited operates a chain of seeks nationwide under Kay Jewelers, Zales and Jared brand names. The flock discloses in a note to its financial statements in the 10-K filing that some of its carry oning leases include predetermined rent increases, which are charged to the revenues statement on a straight-line basis over the lease term, including any construction interval or other rental holiday. Contingent rentals, taxes and common region maintenance are charged to the income statement as incurred. Contingent rentals, or amounts based on proportion of sales in excess of a predetermined level, are separated from minimum gash until the company can determine when it is probable that the expense has been incurred and the amount is reasonably admirable. In fiscal year 2017, Signet incurred minimum rent expense of $524 million and contingent fee expense of $10 million, or approximately 28% of total operating expenses.