BLM00235 - Introduction: Lease accounting: Finance lessee바카라 사이트™s profit and loss account

This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.

In addition to showing in its balance sheet the leased asset and the liability to pay the 바카라 사이트˜capital바카라 사이트™ element in the rentals (accounted for in a similar way to a loan), the finance lessee also has to

  • write off the 'interest' element in the rentals to its profit and loss account in a similar way to any interest on a loan (following the same principles as the lessor uses to recognise earnings); and
  • depreciate the leased asset in the same way as for assets owned outright.

The timing of the deductions is important. For finance leases

  • the interest is deducted by the finance lessee as it accrues and, in accordance with the proportionate principle, more interest will be due early on and less later; and
  • the depreciation deduction depends on the life of the asset or the life of the lease if there is no certainty that the lessee will obtain ownership of the asset. Depreciation is calculated in accordance with the relevant accounting standard. For UK GAAP accounting periods beginning before 1 January 2015 this is FRS15 'Tangible Fixed Assets' or FRS102 Section 17, 바카라 사이트˜Plant and Equipment바카라 사이트™; for accounting periods beginning on or after 1 January 2015 this is FRS102 Section 17. For IFRS and FRS101 this is either IAS 16 바카라 사이트˜Property, plant and equipment바카라 사이트™ or IAS 38 바카라 사이트˜Intangible assets바카라 사이트™.

Further guidance on accounting for finance leases is at BLM13000.