Finance Leasing Manual - FLM21.21

Schedule D Case I: basis for recognising income: accountancy treatment

Apart from Schedule 12 FA 1997, the Board has made no public statement on the timing of rentals received by finance lessors. In contrast to the position for finance lessees it is not possible to derive from SSAP 21 a comprehensive method of allocating rentals to periods of account in computing the lessor's profits under Schedule D Case I. This is because there are no accounting entries, equivalent to the depreciation of the leased asset in the lessee's accounts, to give a means of allocating the non-finance charge element of rentals for this purpose. In particular, the treatment of that element as a repayment of what is regarded as a loan to the lessee (complementing the treatment of the lessee under SSAP 21) does not necessarily bear a direct relationship to the rate at which the lessor enjoys economic benefits under the lease.