Leased Vehicles Fixed Asset or Not

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi this is probably a really stupid question but I am stuck at work with no access to my books and I have a memory block.:oops:

Do you include Leased vehicles in your Fixed Assets? My theory is that if you have a three year lease you are effectively owning that vehicle for those years so you would include it in the Fixed Assets at its lease value and depreciate the cost of the lease?

Am probably wrong but would appreciate some light!!

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Leased Vehicles Fixed Asset or Not

    Operating leases (short term) go into the Income Statement and Finance Leases (long term) go onto the balance sheet. You do include them in your assets and you do depreciate them. I vaguely remember something about splitting the cost of the lease between income statement and balance sheet but can't remember how.


    Sorry to be so vague
    Jackie
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Leased Vehicles Fixed Asset or Not

    Thanks Jackie
    That does help
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Leased Vehicles Fixed Asset or Not

    I had this discussion last year with my intermediate tutor who couldn't help me as she was a novice teacher.

    Doesn't this depend on the type of lease in question - whether it is lease-rental or lease-purchase?

    My company has four vans which are lease-rental but they don't appear on the balance sheet as they don't technically belong to us. All that shows on the P&L/IS is the monthly payment to the leasing company. We don't show depreciation or the acc. dep'n and cost of the lease on the BS. At the end of the three year contract, we also have the option to buy for a pound.

    However, we have two directors cars on lease-purchase which are shown on the balance sheet with the cost of finance and are also depreciated.

    Are we doing this right?

    Robert



  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Leased Vehicles Fixed Asset or Not

    In International Standards, and as far as i'm aware national standards if the answer to any of the following is yes then its a finance lease:

    Is ownership transferred at the end of the lease?

    Does the lease contain a bargain purchase option?

    Is the lease term for the major part of the assets useful life?

    Is the present value of minimum lease payments greater than or equal to assets value?

    Adrian
    PS So Blobby it would appear that at least if you were using international standards they should appear on the balance sheet.

    http://www.iasplus.com/standard/ias17.htm

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