BLM12015 | Lease accounting: operating lease accounting: lessor accounting for depreciation and costs

This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.

This section is applicable to entities applying FRS 102 pre 2024 amendments or FRS 105, and for lessors only under IFRS 16 and FRS 102 (2024 amendments).

See BLM17000 for lessee accounting under the on-balance sheet model under IFRS 16 and FRS 102 (2024 amendments).

FRS 102 (pre 2024 amendments) 20.26 requires the depreciation policy for leased assets to be consistent with the lessor’s normal depreciation policy for similar (non-leased) assets.

FRS 102 (pre 2024 amendments) 20.27 requires any initial direct costs a lessor incurs in negotiating and arranging an operating lease to be added to the carrying amount of the leased asset and recognise such costs as an expense over the lease term on the same basis as the lease income.

The same requirements apply under FRS 105, FRS 102 (2024 amendments) and IFRS 16.