Finance Leasing Manual - FLM31.18

First condition: lease treated as a loan

The treatment of a lease as a finance lease under SSAP 21 is akin to its treatment as a loan. But the lease is not treated as a loan as such. Moreover in the case of a sale and finance leaseback the seller/lessee is required under FRS 5 to deal with the transaction as a loan and not as a finance lease. (The difference is that no profit or loss on the sale of the asset is recognised - see IM2677a for a more detailed explanation.)

BTD4 Leasing has not come across a case where a lessor has shown a finance lease as a loan in its accounts. But in view of the similarity in the two types of accounting presentation the provisions have been drafted to bring in both types.