Finance Leasing Manual - FLM4.23

SSAP21: finance lessee's profit and loss account: timing of deductions

The timing of the accountancy deductions for the finance lessee might well be different after 1984. Before 1984 the total rental payments would probably have been deducted evenly in the profit and loss account over the primary period of the lease (the 'loan' period). This is still what normally happens for operating leases (see FLM1.05 onwards). For finance leases after 1984:

• the interest is deducted by the finance lessee as it accrues in accordance with the proportionate principle outlined earlier (see FLM1.19)interest will be due early on and less later; and

• the depreciation deduction depends on the life of the asset in accordance with the accountancy depreciation standard (SSAP12 'Accounting for depreciation' and FRS15 'Tangible Fixed Assets').