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HMRC internal manual

Business Leasing Manual

Introduction: Lease accounting: Finance lessee’s balance sheet

A finance lessee is required by GAAP separately to show

  • the leased asset as its property in its balance sheet even though it doesn’t legally own it; and
  • the ‘capital’ element it is due to pay in the rentals (the ‘loan’) as a liability in its balance sheet.

This should make it clear to the world at large just how much the lessee has borrowed.