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What is difference between financial lease & operating lease
(IAS 17)? Also pass the journal entry treatment for both the
leases.
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Answer Posted / barodianbuddy(acca)
Financial lease:-
1. long term lease
2. one lessee usually
3. accounting treatment:- lessee capitalize leased asset as non-current asset. Hence depreciates it.
obligation to pay future rentals but this must be split between current & non current liabilities.
4. Substance over the foam concept (IAS 1 & 8)
Operating lease:- only renting of the asset
1. short term lease
2. Accounting treatment:- Lessor shows it as non current asset and receives rentals from lessee.
Lessee shows any amount accrued but unpaid as payable.
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