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HMRC internal manual

Business Leasing Manual

Lease accounting: finance lease accounting: finance lessors: net investment

Under both FRS102 and IAS 17, a lessor’s net investment in a lease is the gross investment in the lease discounted at the interest rate implicit in the lease.

The lessor’s gross investment in the lease is the aggregate of:

  • the minimum lease payments receivable by the lessor under a finance lease, and
  • any unguaranteed residual value accruing to the lessor.

Thus the lessor’s net investment is, in practice, broadly equivalent to the cost of the leased asset.