Under IFRS 16, a rent-free period is a type of lease incentive. Within Oracle's lease accounting solution, this is modeled by setting the lease payments to zero for the specified duration. The system defines these periods not by a continuous date range, but by discrete planning periods (e.g., Jan-23, Feb-23) in conjunction with the lease's overall payment frequency (e.g., Monthly, Quarterly). This allows the calculations for the Right-of-Use asset and Lease Liability to correctly account for the zero cash flow during those specific periods while amortizing the total lease cost over the entire lease term.

A. The index rate is used for calculating variable lease payments that are tied to an index like the CPI, not for rent-free periods.

C. While the period occurs within a date range, the system's calculation logic is based on discrete periods and frequency, which is a more precise description.

- Oracle® Cloud Enterprise Performance Management Cloud

Administering Capital

F54463-03

Chapter 4

"Managing Leases

" Section "Adding Leases

" p. 58. (Describes setting up lease terms

including payment amounts and frequency).

- Oracle® Cloud Enterprise Performance Management Cloud

Administering Capital

F54463-03

Chapter 4

"Managing Leases

" Section "Lease Incentives

" p. 61. (Explains that incentives like rent-free periods affect the initial measurement of the lease liability and right-of-use asset

which implies a zero payment for the period).