A finance lessor's accounts show no physical asset in its
balance sheet even though it owns the leased asset.
Instead a finance lessor has to record the amount due from
the lessee under a finance lease in his balance sheet as a debtor
at the amount of the net investment in the lease (SSAP 21,
paragraph 38; IAS 17, paragraph 36). This figure is the one that
can be envisaged as the amount of the loan.
SSAP 21 (paragraph 22) defines the
net investment in a lease at a point in time as
comprising
IAS 17 (paragraph 4) defines the net investment in a lease as
the gross investment in the lease discounted at the interest rate
implicit in the lease.
The meaning of the two is essentially the same.
The gross investment in a lease at a point in time is the
total of the minimum lease payments and any unguaranteed residual
value accruing to the lessor. The
minimum lease payments are defined in
BLM11010.
