Depreciation on leased assets

Depreciation on leased assets

Didn't find your answer?

New client. Doing accts for 1st time. Small Ltd Co.  Acctg policy says to depreciate over the shorter of the economic life & lease term. Lease term is38 mths.  Depreciation has been calc at 25% RB which will leave the MV on the balance sheet long after the lease has ended.  Is this wrong?

Replies (1)

Please login or register to join the discussion.

avatar
By TerryD
25th Mar 2015 12:14

If this is effectively a hire purchase contract, then the depreciation should be over the total useful life of the asset, so the accounts are correct. If not, then the accounting policy is correct, and the accounts are wrong. Either way, you need to make sure that the accounting policy says what is really happening.

Thanks (1)