Finance Leasing Manual - FLM31.17

First condition: finance lease accounting requirement

The condition that the lease (viewed together with surrounding transactions) must be treated as a finance lease will be satisfied, even if it is not presented as such in the lessor's accounts, in one or more of the following circumstances:

• it is treated as a loan rather than a finance lease in the lessor's accounts - see FLM31.18;

• it is treated as an operating lease in the lessor's accounts correctly drawn up in accordance with foreign accounting practice but would have been treated as a finance lease (or loan) if those accounts had been drawn up in accordance with UK standards - see FLM31.20;

• it is treated as an operating lease in the accounts of an unincorporated lessor but would have been treated as a finance lease (or loan) if those accounts had been drawn up in accordance with UK standards - see FLM31.25;

• it is in fact treated as an operating lease in the lessor's accounts drawn up by reference to UK accounting standards but it ought to have been treated in those accounts as a finance lease (or loan) - see FLM31.26;

• it is treated as an operating lease in the lessor's accounts (whether correctly and in accordance with UK standards or not) but in the consolidated group accounts it is correctly treated in accordance with UK standards as a finance lease (or loan) - see FLM31.28;

• it is treated as an operating lease in a corporate lessor's accounts and there is no requirement to prepare consolidated accounts in accordance with UK standards but, if (on the assumption that the lessor and companies connected with it were incorporated in the UK) consolidated accounts in accordance with UK standards would have been required, the lease would have been treated as a finance lease (or loan) - see FLM31.31;

• it is treated as an operating lease in a corporate lessor's accounts (whether correctly and in accordance with UK standards or not) and in the consolidated group accounts but it ought to have been treated as a finance lease (or loan) in the consolidated group accounts if they had been correctly drawn up in accordance with UK standards - see FLM31.35;

• it is treated as an operating lease in the lessor's accounts but it is treated as a finance lease (or loan) in the accounts of a connected person or would be so treated if those accounts were correctly drawn up in accordance with UK standards - see FLM31.36.