A key distinction has historically been made, for accounting and tax purposes, between an ‘operating lease’ and a ‘finance lease’.

For entities applying FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, the distinction remains in place. However, the distinction is now removed for entities applying FRS 101 or International Financial Reporting Standards (IFRS) who are required to adopt IFRS 16 (see ¶220-065).

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