BLM15535 - Lease accounting: finance lease accounting: finance lessees: example 1: accounting entries when the 'loan' is repaid

The accounting is as for a loan. When the loan has been repaid, the liability disappears from the balance sheet. But the leased asset remains in the balance sheet, even though it is still subject to the terms of the lease. The accounting entries based on Example 1 at BLM15505 are:

Balance sheet at end	Year 1 (£)	Year 2 (£)	Year 3 (£)	Year 4 (£)	Year 5 (£)
Assets
Leased Asset	50,000	50,000	50,000	50,000	50,000
Depreciation	(2,500)	(5,000)	(7,500)	(10,000)	(12,500)
Net book value	47,500	45,000	42,500	40,000	37,500
Liabilities
Lease creditor	50,000	41,414	32,173	22,227	11,522
Repayment	(8,586)	(9,241)	(9,946)	(10,705)	(11,522)
Net	41,414	32,173	22,227	11,522	Nil
Profit and Loss A/c
Depreciation	2,500	2,500	2,500	2,500	2,500
Finance Charge	3,814	3,159	2,454	1,695	878

When the ‘loan’ has been repaid, in economic terms the lessee is now the only party with a significant interest in the underlying asset, yet the lessor retains ownership.