ACCOUNTING AND TAXATION OF LEASING CONTRACTS

LEASING ACCOUNTING ACCORDING TO NATIONAL REGULATIONS

Accounting of the operating lease at the lessor.

The assets transferred in operational leasing are reflected in the lessor’s balance sheet. The NAS “Leasing contracts”, item 44 provides that the initial direct costs, directly related to the negotiation and conclusion of the operational leasing contract (for example, commissions for searching for the lessee, valuation services, legal) that according to the conditions of the contract are borne by the lessor, are recorded as current expenses. If these costs exceed the predetermined materiality threshold and refer to two or more management periods, they may be accounted for as anticipated expenses with subsequent settlement within the lease term at current costs and/or expenses in the manner provided by the lessor’s accounting policies.

According to item 45 of the standard, operational leasing payments received or receivable according to the contractual conditions are recognized as current income during the lease term according to accrual accounting on a systematic basis provided in the lessor’s accounting policies.

The depreciation of assets transferred in operational leasing is calculated by the lessor in accordance with the requirements of the NCS “Intangible and tangible assets” by the method accepted in the accounting policies and not necessarily by the methods applied for own fixed assets. The costs related to the return of leased assets incurred by the lessor are recorded as current and/or anticipated expenses, depending on the materiality threshold predetermined in the accounting policies.

• In the case of operational leasing, the lessor performs the following operations:
• accounts for  the  assets  transferred  in  operational  leasing  in  the  financial  accounting accounts;
• calculates the depreciation of leased assets both in financial accounting and for tax purposes;
• ascertains the leasing payment as operating income as it is calculated;
• bears the  costs of repair and modernization of  the leased       assets (unless otherwise stipulated in the contract);
• records as income (expenses) the penalties calculated for the violation of the conditions of the operational leasing contract;
• receives from the lessee the leased assets after the expiry of the lease term or upon cancellation of the operational lease contract.