Finance Leasing Manual - FLM10.22

Apportionment of rents: Rule of 78

The following is a brief explanation of the Rule of 78. The SSAP21 guidance notes for the Rule of 78 method state (paragraph 28)

`The rule of 78 may normally be regarded as an acceptable approximation to the actuarial method; it works well provided that the lease term is not very long (say, not more than seven years) and interest rates are not very high.`

If these provisos do not apply but this method has nonetheless been used, it would be pertinent to ask why.