Finance Leasing Manual - FLM10.55

Example 2: allocating the interest element

The lessee's finance charges (the 'interest element') of the rentals are then allocated to the different periods of account using one of the prescribed methods (SSAP21 Guidance Notes, paragraph 20 onwards - see FLM10.17). In Example 1 the Rule of 78 was considered likely to be an acceptable method. This is less clear in Example 2, see FLM10.57 onwards.