3 ms·

What exactly is deferred rent and what does it mean for We Company?

• nknealk 7y ago
  Let me try to explain with an example. GAAP requires straight line depreciation of a lease. So if I gave you a 2 year lease on a facility and required a single payment of $1M at the end of the term, you'd account for that as 500K expense in year one, 500K in year 2. In year 1, your cash balance didn't change though right? I only wanted payment in year 2. So you record a 500K deferred rent liability to indicate that the expense has yet to hit your cash balance. Basically over some set of future years they'll have to pay out 2.8B of cash. But they don't disclose the timing on when those payments come due.
  • fjp 7y ago
    Very clear explanation, thank you. It seems somewhat curious they don't have to reveal when they would be contractually obligated to pay out?
    • nknealk 7y ago
      They are required to disclose it. See page f-59 at the top. You'll note that their lease payments are 1.3B this year but go up every year after. Edit: the rate of increase is startling. They are going to have an additional 500M in leases on top of their expense this year plus another 200M come 2021 on top of that
      • glaive123 7y ago
        Is the $500M in leases on top of their expenses assuming 0 growth? Or is their growth plan baked in? Also, is the deferred rent liability fixed assuming 0 growth?