Finance Leasing Manual - FLM11.25

Lessee's rentals: use of SSAP21

SSAP21 was a response to the manipulation of what is included in the balance sheet (for more about this see FLM4.07 onwards). The standard provides (applying its terms and SSAP12) that the rents be matched with income in accordance with the accruals (matching) concept in SSAP2 (Statement of fundamental accounting concepts). This is consistent with the approach adopted by the Courts in the past to profit recognition. This was recognised by the Court of Appeal in Threlfall v Jones (66TC77) in which the accounting practice based on SSAPs 2 and 21 was accepted as providing a valid basis for profit recognition for tax.