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Operating lease or Financing lease

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Operating lease or Financing lease

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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  • November 27, 2018 at 9:29 pm #486198
    maxpopper
    Member
    • Topics: 177
    • Replies: 132
    • ☆☆☆

    Sir there is a question in kaplan kit in which one of the para of the scenario is that

    Lease offer is as follows

    Lease will be over 5 years with lease rental payments of $146000 annually in advance. Tax is payable 1 year after accounting year end and corporation tax rate is 25%. Maintenance is payable by lessor and costs $20000 per annum payable at the end of each year, including the last year in preparation for sale the residual value is expected to be $40000 (expected tax written down at end of the lease) and lessor will retain that.

    Is the above operating lease or financing lease. Also is operating lease just for 1 year or can it be greater than 1 year?

    November 28, 2018 at 6:15 am #486221
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54835
    • ☆☆☆☆☆

    As far as Paper FM is concerned, it now makes no difference (and an operating lease can certainly be for more than one year).

    I explain how to deal with this question in my free lectures on lease versus buy.

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