Lessor Plc leased an aircraft to A Ltd on a 6-year lease that
ended on 30 April 2000 and the same aircraft was leased for a
further 6 years to B Ltd from 1 June 2000 to 31 May 2006. When the
second lease ended Lessor Plc granted C Ltd a 10-year lease
beginning on 1 July 2006. The new 10-year lease is not a long
funding lease because the aircraft had been leased for more than 10
years before 1 April 2006 and Lessor Plc was the lessor of the
aircraft on the last day before 1 April 2006 on which it was leased
(here, 31 March 2006).
Had the second lease been for 5½ years and ended on 30
November 2005 and the third lease still been entered into on 1 July
2006 the third lease would still not be a long funding lease
because Lessor Plc was the lessor of the aircraft on the last day
before 1 April 2006 on which it was leased (here 30 November 2005).
Had Lessor Plc sold the aircraft to another lessor before the
third lease was entered into, the third lease would be classified
as a long funding lease or not using the normal tests for
establishing whether a lease is a long funding lease. Thus, for
example, if the aircraft’s remaining expected useful economic
life was only the remaining 10 years of the third lease the lease
would be a long funding lease because it meets the useful economic
life test in CAA01/S70P.
