Lease Accounting Glossary

A professional assessment made by management where the accounting outcome is not determined by objective fact alone.

A period-by-period table showing the opening balance, interest charge, payment, and closing balance of the lease liability.

A grouping of underlying assets of a similar nature — such as Property, Vehicles, or Equipment.

Documentation that supports the amounts and disclosures in the financial statements and enables the auditor to form a conclusion.

A complete record showing how an accounting figure was created, reviewed, approved, and evidenced — from source document to financial statement.

The recognition of a right-of-use asset and a lease liability on the statement of financial position.

A published reference interest rate used as the starting point for calculating borrowing rates.

A contractual provision allowing either party to terminate the lease at a specified date or after giving notice.

A saved calculation of a lease at a specific point in time, based on the lease terms, discount rate, and accounting standard selected.

A required note disclosing total cash outflows from leases, including principal, interest, and exempt lease payments.

The presentation of lease payments in the cash flow statement, split between principal, interest, and exempt lease payments.

The date on which the lessor makes the underlying asset available for use by the lessee.

A formal amendment to an existing lease agreement that changes one or more of its terms — potentially triggering a lease modification.

The customer's right to obtain substantially all of the economic benefits from an identified asset and to direct how and for what purpose it is used.

Lease payments that increase in line with the Consumer Prices Index.

The additional interest rate above a risk-free benchmark that reflects the credit risk of the borrowing entity.

The portion of the lease liability due within 12 months of the balance sheet date.

A review to confirm that all in-scope leases are included in the lease register and that all required data fields are populated.

A system-generated flag indicating that a lease or entity has missing or potentially incomplete data that affects the statutory note.

The periodic journal entry that charges depreciation on the right-of-use asset to the profit and loss account.

A period-by-period table showing the carrying value of the right-of-use asset and the depreciation charge each period.

The removal of the right-of-use asset and lease liability from the balance sheet when a lease ends or is terminated.

A UK term for the cost of repairing or restoring a leased property to its original condition at the end of the lease.

A note in the statutory accounts that explains the amounts, judgements, and movements behind lease accounting balances.

The interest rate used to calculate the present value of future lease payments.

The documented professional judgement used to determine the discount rate applied to a specific lease.

The method of calculating and allocating interest on a financial liability using a constant periodic interest rate.

A lease contained within a wider service, outsourcing, or supply contract — often not labelled as a lease.

The full traceable link from a financial statement figure back to source data, calculations, and documented judgements.

The date on which the non-cancellable lease term ends.

A contractual right giving the lessee the ability to extend the lease term beyond the original expiry date.

The combined effect of lease accounting on the balance sheet, profit and loss account, and cash flow statement.

A payment from the lessor towards the cost of fitting out the leased premises — a type of lease incentive.

Lease payments that are fixed in amount and do not vary based on usage or external factors.

The amendments to FRS 102 Section 20 effective for periods beginning on or after 1 January 2026, introducing a right-of-use model for lessees.

The section of FRS 102 that governs lease accounting for UK and Irish entities applying UK GAAP.

The cumulative effect of adopting the new FRS 102 lease model, recognised in retained earnings at the transition date.

The difference between the carrying amount of the lease liability derecognised and the right-of-use asset derecognised at the date a lease ends or is partially terminated.

The primary lease held by a lessee before it grants a sublease to another party.

A period after the contractual lease expiry during which the lessee continues to occupy the property without a new agreed lease term.

An asset that is explicitly or implicitly specified in a contract and is the subject of the customer's right to use.

The rate of interest that makes the present value of lease payments and unguaranteed residual value equal to the fair value of the underlying asset.

The rate at which the lessee could borrow funds to obtain a similar asset over a similar term, in the same currency.

Lease payments that rise in line with a published index such as CPI or RPI.

Incremental costs incurred to obtain a lease that would not have been incurred if the lease had not been obtained.

The calculation of the lease liability and right-of-use asset values at the commencement date.

The accounting entry that recognises the right-of-use asset and lease liability at the lease commencement date.

The finance cost recognised each period on the lease liability, calculated using the effective interest method.

The periodic journal entry that recognises the finance cost on the lease liability as an interest expense in the profit and loss account.

A set of journal entries representing a complete accounting transaction.

An individual debit or credit entry within a journal batch.

A contract that conveys the right to use an asset for a period of time in exchange for consideration.

A structured summary of the key accounting and commercial terms extracted from a lease agreement.

The initial recognition journal entry that brings the right-of-use asset and lease liability onto the balance sheet at the lease start date.

The part of a contract that conveys the right to use an underlying asset — as distinct from any service or non-lease elements.

Information included in the financial statements explaining lease assets, liabilities, expenses, cash flows, and key judgements.

A benefit provided by the lessor to induce the lessee to enter into a lease — such as a rent-free period, fit-out contribution, or cash payment.

The present value of future lease payments that the lessee is obligated to make under the lease.

A disclosure showing the opening balance, additions, interest, payments, and closing balance of the lease liability over the period.

A change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions.

The periodic journal entry that reduces the lease liability when a lease payment is made.

The payments made by the lessee to the lessor for the right to use the underlying asset.

A centralised record of all leases held by an entity, containing the key terms, accounting inputs, and status of each lease.

The non-cancellable period of a lease, plus optional extension or termination periods where exercise is reasonably certain.

The end of a lease before or at the contractual expiry date, resulting in derecognition of the lease liability and right-of-use asset.

The party that obtains the right to use an underlying asset under a lease.

The party that provides the right to use an underlying asset in exchange for lease payments.

An election to keep leases off the balance sheet where the underlying asset has a low value when new.

A contractual requirement for the lessee to restore the leased asset to its original condition at lease end — including removing any alterations made during the tenancy.

The explanation prepared by management to support an accounting judgement, estimate, or policy choice.

A rent review clause that resets lease payments to the prevailing open market rent at a specified review date.

The threshold below which an omission, misstatement, or disclosure gap would not reasonably influence users of the financial statements.

A disclosure showing undiscounted future lease payment obligations split by time band.

A transition method that applies the new lease accounting rules from the transition date without restating prior year comparatives.

The carrying amount of the right-of-use asset after accumulated depreciation.

The portion of the lease liability due after more than 12 months from the balance sheet date.

A component of a contract that provides goods or services separately from the right to use an underlying asset.

A practical approach to estimating the IBR using a benchmark rate plus a credit spread and any lease-specific adjustment.

The future minimum lease payments disclosed under the old FRS 102 standard, now used as a starting point for transition calculations.

The process of evaluating whether a renewal, extension, purchase, or termination option is reasonably certain to be exercised.

A reduction in the scope of a lease — for example, giving back part of a floor — that reduces but does not eliminate the lease liability and right-of-use asset.

How often lease payments are made — monthly, quarterly, annually, etc.

Whether lease payments are made at the start (in advance) or end (in arrears) of each payment period.

A lease with nominal or very low lease payments — common in charity, public sector, and property contexts.

A summary report of lease liabilities, ROU assets, P&L charges, and maturity at a given period end date.

An accounting policy that applies lease accounting to a group of similar leases where the result is not materially different from applying it lease by lease.

The current worth of a future stream of cash flows, discounted at a given rate.

The depreciation and interest expenses recognised in the profit and loss account as a result of lease accounting.

A contractual right for the lessee to purchase the underlying asset at the end of the lease term.

The threshold used to assess whether an option will be exercised — a higher hurdle than "more likely than not".

A review of key lease accounting assumptions — such as lease term or option exercise — when facts or circumstances change significantly.

A contractual obligation to return a leased asset to a specified condition at the end of the lease — broadly synonymous with make-good and dilapidations.

The recalculation of the lease liability (and corresponding right-of-use asset) when lease payments, the lease term, or other assumptions change.

A contractual right for the lessee to extend the lease beyond its non-cancellable period.

A contractual mechanism that increases lease payments over time, typically linked to an index or fixed percentage.

A contractual mechanism allowing the rent to be reviewed and potentially reset at a specified date.

A period at the start (or sometimes during) a lease where no lease payments are due — a common form of lease incentive.

A guarantee made by the lessee of the value of the underlying asset at the end of the lease.

The component of the right-of-use asset representing a capitalised restoration or make-good obligation recognised at lease commencement.

An estimated liability for costs to restore a leased asset to its original condition at the end of the lease.

A new lease agreed in advance to commence at the expiry of an existing lease on the same property.

The customer's right to decide how and for what purpose an identified asset is used throughout the period of use.

An asset representing the lessee's right to use an underlying leased asset during the lease term.

Lease payments that increase in line with the Retail Prices Index — a very common mechanism in UK property leases.

A transaction where an entity sells an asset to a buyer and simultaneously leases the same asset back from the buyer.

A sum of money held by the lessor as security against the lessee's performance — not included in the lease liability calculation.

The process of dividing a contract's payments between the right-to-use element and any services or other goods included.

A charge in a property lease covering shared costs such as building maintenance, insurance, and utilities.

An accounting policy election that allows leases of 12 months or less to be kept off the balance sheet.

A supplementary document agreed alongside or after the main lease that modifies or clarifies specific terms without formally amending the lease.

Sterling Overnight Index Average — the Bank of England's overnight interest rate benchmark for GBP.

The original document that supports lease accounting data — typically the signed lease agreement, variation letter, or rent review memorandum.

A short extract from a source document that shows where a specific lease field or judgement value was found.

The lease accounting disclosure note prepared for inclusion in the statutory accounts.

A method of depreciating the ROU asset by an equal charge each period over the useful life.

A lease in which the original lessee (as intermediate lessor) leases the underlying asset, or part of it, to another party.

How the lease liability and right-of-use asset values are updated after the commencement date.

The customer's right to obtain substantially all of the economic output and other benefits from using an identified asset during the lease term.

A contractual right for the lessee to end the lease before the end of the non-cancellable period.

The date from which the new FRS 102 lease accounting standard is applied for the first time.

The asset that is the subject of a lease — the asset the lessee has the right to use.

The period over which an asset is expected to be economically useful to its owner.

Payments that vary based on usage, performance, or a factor other than the passage of time.