Finance Leasing Manual - FLM10.61

Example 2: straight-line method: whether acceptable

The Financial Reporting Standard for Small Enterprises (FRSSE) permits, but does not require, finance lessees which are 'small' companies to account for the interest portion of rentals by apportioning the total interest element evenly over the primary period of the lease. This method will usually defer somewhat the deduction for that element of the rentals. Where that method is used in the accounts of a small company, it may be followed for tax purposes. 'Small company', for this purpose, is as defined for Companies Act purposes. Subject to minor exceptions it is a company which has an annual turnover under £2.8 million (and is not a member of a group with a turnover above this figure).