Lease accounting: operating lease accounting: introduction
Operating lease accounting is very simple compared with finance lease accounting and is similar under UK GAAP, IFRS and FRS101. Accounting differences arise with respect to depreciation of operating lease assets, initial indirect costs for lessors (BLM12015) and operating lease incentives (BLM12025).
As far as the recognition of income and expenses is concerned, lessors and lessees are treated in a similar way, see BLM12010 and BLM12020 respectively.
An operating lessor records the leased asset on its balance sheet in the same way as it records any other fixed asset and it should be depreciated over its useful life in the normal way.
An operating lessee records no asset on its balance sheet. Only the rentals pass through its profit and loss account.