FRS 102 Disclosure of operating lease commitments  

Introduction

This topic explains the process of disclosing Operating Leases within the notes to the Accounts?  

There has been a significant change from the existing UK GAAP to the disclosure of commitments under operating leases.

Users are able to generate a set of accounts using the new FRS 102 legislation which is effective for periods starting on or after 1st January 2015.

Previously under UK GAAP, the requirement was to disclose annual commitments analysed between those leases expiring within one year, between two and five years and after more than five years.

To enter this information within IRIS Accounts Production select, Edit | Data Screens | Notes to Financial Statements | Balance Sheet Items | Hire Purchase Contracts and Leases | Operating Lease Commitments

Now, under FRS 102 it is required to disclose the total commitment.

To enter this information within IRIS Accounts Production select, Edit | Data Screens | Notes to Financial Statements | Balance Sheet Items | Leasing Agreements | Operating Leases

Example

A company enters a 20 year operating lease for office space at an annual commitment of £100,000 at the beginning of the year; this is its only operating lease.

• How is this disclosed under UK GAAP?

At the year end the company had annual commitments under operating leases expiring after more than 20 years of £100,000.

• How will it be disclosed under FRS 102?

At the year end the company had total commitments under operating leases expiring after more than 20 years of £1,900,000.

Notice that the amount included in the note would be the same for the next 18 years under UK GAAP (assuming that there were no other operating leases) but would of course come down by £100,000 per annum under FRS 102.