BMS SSF- Finance Lease and Operating lease

Finance Lease :

risks and rewards incident to ownership. title may or may not eventually be transferred.

At the inception of a finance lease, the lessee should recognise the lease as an asset

and a liability. Such recognition should be at an amount equal to the fair value of the

leased asset at the inception of the lease. However, if the fair value of the leased asset

exceeds the present value of the minimum lease payments from the standpoint of the

lessee, the amount recorded as an asset and liability should be the present value of the

minimum lease payments from the standpoint of the lessee.

A lease is classified as a finance lease if it transfers substantially all the

Operating Lease :

substantially all the risks and rewards incident to ownership. Lease payments under an

operating lease should be recognised as an expense in the statement of profit and loss

on a straight line basis over the lease term unless another systematic basis is more

representative of the time pattern of the user’s benefit.A lease is classified as an operating lease if it does not transfer