BLM14045 - Lease accounting: finance lease accounting: finance lessors: accounting example
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.
Continuing the example in BLM14040, the accounts will show the following figures:
Year |
Gross earnings |
Net Investment in lease at Start of year |
Reduction |
Net Investment in lease at End of year |
|---|---|---|---|---|
1 |
1,100 |
10,000 |
598 |
9,402 |
2 |
1,035 |
9,402 |
663 |
8,739 |
3 |
962 |
8,739 |
736 |
8,003 |
4 |
880 |
8,003 |
818 |
7,185 |
5 |
790 |
7,185 |
908 |
6,277 |
6 |
690 |
6,277 |
1,008 |
5,268 |
7 |
579 |
5,269 |
1,119 |
4,150 |
8 |
456 |
4,150 |
1,242 |
2,908 |
9 |
320 |
2,908 |
1,378 |
1,530 |
10 |
168 |
1,530 |
1,530 |
0 |
Total |
6,980 |
|
10,000 |
|
The lease rentals receivable, £1,698 a year, are not shown in the accounts as such, but are apportioned between the gross earnings (the ‘interest’ element) and the reduction in the net investment in the lease (the ’repayment’ element). For example:
Year 1 - 1,100 + 598 = 1,698
Year 2 - 1,035 + 663 = 1,698