Finance Leasing Manual - FLM11.21

Lessee's rentals: timing of deduction: finance leases entered into on or after 12 April 1991

SP 3/91 (see Appendix 1) should be applied to leases entered into on or after 12 April 1991. The Statement of Practice confirms that finance lease rentals are revenue outgoings which should be allocated to periods of account in accordance with commercial accounting principles. The principles particular to leases are set out in SSAP 21 (Accounting for leases). But, as with other standards, SSAP 21 is designed to apply the fundamental accounting principles; so we would expect rentals to be allocated in a manner consistent with the fundamental 'accruals' concept set out in SSAP 2. Under the matching leg of that concept expenditure should be set against the income it can be assumed to generate. General guidance on the accruals concept is at IM537.)