FRS 102: Leasing transactions

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Steven Collings
Audit and Technical Partner
Leavitt Walmsley Associates Ltd
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One of the most topical debates at the moment, certainly among the International Accounting Standards Board, is the issue of leasing explains Steve Collings. 

Leases have always posed a problem for the profession because of their subjective nature and the ability to manipulate leasing transactions to achieve a desired outcome (commonly referred to in the profession as ‘off balance sheet finance’). This article takes a look at leasing in the context of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and also takes a brief look at the IASB’s proposals that may affect companies in the future.

Leasing is dealt with in FRS 102 in Section 20 Leases. At the outset this particular section confirms that it does not deal with...

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  • Finance and operating leases
  • Determining the amounts in a finance lease
  • Subsequent measurement: Finance leases
  • Operating leases
  • Lessor accounting: Finance leases
  • Manufacturer or dealer lessors
  • Lessor accounting: Operating leases
  • Disclosures: Finance leases
  • Disclosures: Operating leases
  • Leasing: The future?

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09th Oct 2013 15:25

Excellent article as always, Steve. A couple of additional points readers need to be aware of

Firstly the treatment of operating lease incentives in FRS 102 is different to SSAP 21 (which spreads them to the first rent review). This will give rise to a transition adjustment when FRS 102 is adopted.

Secondly, a few years ago, the tax law was changed such that a change in accounting principles for leases would be ignored for tax purposes. Therefore leases will continue to be treated in accordance with SSAP 21 for tax purposes.

This could mean adjustments need to be made for tax purposes and that deferred tax may be needed as a result.


Malcolm Greenbaum

Director, Greenbaum Training & Consultancy Limited


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