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HMRC internal manual

Business Leasing Manual

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HM Revenue & Customs
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Lease accounting: accounting standards: relevant accounting standards

Lease accounting is primarily governed by SSAP 21 for accounting periods beginning before 1 January 2015 and FRS102 for accounting periods beginning on or after 1 January 2015 (UK GAAP) or IAS 17 or FRS101 (IFRS). However, there are other standards that help determine whether or not a transaction is treated for UK GAAP for accounting periods beginning before 1 January 2015 and for IFRS as a lease and so accounted for under these standards.

These standards are discussed in the following sections

  • FRS 5 Substance of transactions, particularly Application Note B, see BLM10020
  • IFRIC 4 Determining whether an arrangement contains a lease, see BLM10025
  • SIC-27 Evaluating the substance of transactions involving the legal form of a lease, see BLM10035.

The effect of these standards is that

  • some transactions that are leases in legal form are accounted for as though they were not leases, and
  • some transactions that are not leases in legal form are accounted for as if they were leases.

As mentioned at BLM10010, the detail of these standards is outside the scope of this Manual and the following paragraphs only give a flavour of their effect.

There is also supplementary guidance that deals with how to account for operating lease incentives from the perspective of both the lessee and the lessor. This is contained in (for accounting periods beginning on or before 1 January 2015 UITF 28 (UK GAAP) and SIC 15 (IFRS). Differences exist between these two accounting conventions which are covered at BLM12025.

Accounting for service concessions (FRS 5, Application note F, and IFRIC 12) is covered at BLM20150. These are transactions that have some similarities with leasing transactions but which should be accounted for as set out in those standards.