2 min read
Definition
A dilapidations provision is a provision for the estimated cost of making good a leased property — repairs, redecoration, removing alterations — to meet the lease’s end-of-term obligations.
In plain terms
Most commercial leases require you to hand the space back in a set condition. That cost is real and can be large, so prudent accounts recognise it in advance.
Why it matters for your company
An unprovided dilapidations bill can blow a hole in year-end cash. Provide for it steadily and keep a reserve. It is the prudence concept applied to leases.
Related reading
Provision (accounting)
A provision is money set aside in the accounts for a likely future cost you cannot yet pin down — bad debts,…
Read →Prudence concept
The prudence concept says: book likely losses early, book gains only when they are certain — the conservative…
Read →
Operating lease
An operating lease is essentially renting — you use the asset for part of its life, the lessor keeps the…
Read →
Cash reserve
A cash reserve is money you keep aside on purpose — the buffer that lets a business absorb a bad month…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.