BLM00650 - Rentals

In general, operating lease payments can be thought of as reflecting the market rate for leasing the asset concerned and not as containing an interest and capital element.

However, operating lease rentals are not always based on the market rate for the asset concerned and such leases can function as financing transactions. The accountancy treatment always reflects the legal form of the transaction (hire of an asset), where the lease is classified as an operating lease, but the commercial reality can be different, as explained at BLM00060 and BLM00065.