Could you please explain to me below:
In an operating lease situation the affected asset is not depreciated.
Why is this so?
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
Well noted..thanks a lot
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