Lease accounting: finance lease accounting: finance lessees: example 2: whether Rule of 78 acceptable
There are two steps to consider in deciding whether the Rule of 78 is an acceptable method for the circumstances of Example 2 (see BLM15605 onwards).
First and foremost, is the method of apportionment used in accordance with GAAP? This is an accountancy issue, and it is crucial that you should seek detailed accountancy advice from your local advisory accountant.
Secondly, accounts consistent with GAAP might nonetheless be overridden for tax purposes if the accounting practice is not consistent with the underlying facts but acceptable for accounting on the grounds of materiality.