Finance Leasing Manual - FLM25.15

Back loaded leases: bad and doubtful debts

The starting position under SSAP 21 for back-loaded leases is set out at FLM25.09. However, finance lessors are not compelled for accountancy purposes to show a profit if, say, the deal has gone sour and there is a real risk the lessee can't pay. Where there is doubt that the rentals will be paid the lessor can either defer bringing in the SSAP 21 'interest' as earnings or make a provision against those earnings. Each has the same net effect.