Can land be part of finance lease ?

This topic has 3 replies, 2 voices, and was last updated 6 years ago by mrjonbain.

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February 15, 2018 at 7:03 pm #437492
bballhawk
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I have seen conflicting information. Your notes say that land is always operating, but in the BPP book it says it could be financing ( PV of “land portion” is substantially all of land FV) . Can somebody in the know give me a quick ruling ?
February 16, 2018 at 5:24 pm #437636
mrjonbain
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I would not describe myself as someone in the know but the following link suggests that in some unusual circumstances land can be part of finance lease.Hope this helps-
https://www.accaglobal.com/uk/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/How-to-account-for-property.html
February 16, 2018 at 8:29 pm #437668
bballhawk
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Thank you Mrjonbain, strangely that made it worse. I guess very long term land leases only are considered finance.
I thought the the present value of the land portion payments is a …..thing to consider, but if that article doesn’t mention then ….it isn’t?
LOL (I am actually laughing in the library )
Oh, well. Thank you
February 22, 2018 at 12:35 pm #438360
mrjonbain
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I strongly believe the examiner would not have land as part of finance lease in exam if that makes you feel better.I am sure I have read in past that hundred year leases on land for commercial use tend to have similar values as freehold leases.
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