Finance lease: Difference between revisions
imported>Doug Williamson (Spacing.) |
imported>Doug Williamson (Update for FRS 102) |
||
| Line 9: | Line 9: | ||
Relevant accounting standards include IAS 17 and Section 20 of FRS 102 which incorporates practice from the former SSAP 21. | |||
| Line 23: | Line 21: | ||
* [[Hire purchase]] | * [[Hire purchase]] | ||
* [[IAS 17]] | * [[IAS 17]] | ||
*[[FRS 102]] | |||
* [[SSAP 21]] | |||
* [[Implied rate of interest]] | * [[Implied rate of interest]] | ||
* [[Lease]] | * [[Lease]] | ||
* [[Off-balance sheet finance]] | * [[Off-balance sheet finance]] | ||
* [[Operating lease]] | * [[Operating lease]] | ||
Revision as of 10:49, 6 November 2015
A finance lease usually involves the lessee (user of the asset) paying - over the life of the lease - the full cost of the asset plus a return on the finance effectively provided by the lessor.
The lessee-user effectively retains substantially all the risks and rewards of ownership. However, the lessee does not obtain legal title to the leased asset.
Accounting standards require finance leases to be accounted for 'on balance sheet' by the user of the asset.
This means that the liability to pay (the capital element of) the future lease instalments is recognised and disclosed on the face of the balance sheet.
Relevant accounting standards include IAS 17 and Section 20 of FRS 102 which incorporates practice from the former SSAP 21.
Finance leases are also known as capital leases, especially in the US.
See also
- Actuarial method
- ED 2010/9
- Finance charge
- Hire purchase
- IAS 17
- FRS 102
- SSAP 21
- Implied rate of interest
- Lease
- Off-balance sheet finance
- Operating lease
