BLM15625 - Lease accounting: finance lease accounting: finance lessees: example 2: whether Rule of 78 acceptable
This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.
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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.