Lease hire - is it an asset??

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
We have lease hired a photocopier - would think then be a company asset? I would have said not as we do not own it but my boss seems to think that it should be included in our balance sheet as an asset?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Lease hire - is it an asset??

    You are correct your boss is wrong.

    Once you 'own' the asset then it becomes an addition in your balance sheet.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Lease hire - is it an asset??

    It's slightly more complex than that as you can 'own' an asset for accounting purposes without actually owning it. It really depends on the type of leasing arrangement. IAS 17 (as does SSAP 21) distinguishes between a 'finance lease' where the leased item is treated as a capital asset and an 'operating lease' where it is not.

    An operating lease is usually a short-term arrangement where the 'risks and rewards' of ownership are not transferred to the lessee.

    A finance lease is a long-term arrangement where the risks and rewards are trasnsferred. Essentially, the leased item is owned in all but title by the lessee.

    Check out IAS 17 for full (and complicated!) details.

    I would assume, that the hire of a photocopier would be most likely come under an operating lease. In that case you would be right.

    Chris


  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Lease hire - is it an asset??

    The vast majority of photocopiers are operating leases as Chris suggests. The asset does not go on the balance sheet, but you can claim all of the leasing costs on the P&L.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Lease hire - is it an asset??

    hmmmm my reply was abit lazy wasn't it :oops:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Lease hire - is it an asset??

    Ah, but the more detailed I make my answers the longer I can avoid the work I really should be doing :)

    Chris
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Lease hire - is it an asset??

    Chris - I do know how you feel - I really cant be bothered any more this afternoon - I have won one battle with Revenue (lost client's cheque for July payment despite having UTR written on the back :evil: - so now tomorrow's little battle will be to try and get them to write off the 73p he underpaid by - cos he paid the amount they told him to pay :twisted:

    Grrrrr

    Claudia

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