Lease

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    noush24
    Participant
    • Topics: 8
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    Dear Sir,
    Could you please explain to me below:
    In an operating lease situation the affected asset is not depreciated.

    Why is this so?


    Profile photo of MikeLittle
    MikeLittle
    Keymaster
    • Topics: 1
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    Because we don’t capitalise it. Only for a finance lease do we “pretend” that the asset is ours.

    This is one of the issues at present being discussed about this apparently arbitrary distinction between the treatment of operating / finance leased assets

    For a finance lease, the fair value of the asset is capitalised and depreciated

    For an operating lease we merely record as expenses through Profit or Loss the operating lease payments

    Ok?


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    noush24
    Participant
    • Topics: 8
    • Replies: 5

    Well noted..thanks a lot


    Profile photo of MikeLittle
    MikeLittle
    Keymaster
    • Topics: 1
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    You’re welcome

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