FRS 102 · Amended 2026 · Section 20
FRS 102 lease calculator
Enter a lease. Get the liability, the right-of-use asset, the journal, the full amortisation schedule and the maturity note — with every figure traceable back to the payment schedule.
At commencement
Right-of-use asset
Commencement journal
Lease liability — amortisation
Profit and loss, against the old straight-line charge
Same total cost, different shape. This is the table that surprises boards.
Maturity of lease liability disclosure note
One lease is a spreadsheet. Forty is a problem.
Every lease, every judgement, every journal — in one place your auditor can read
This calculator does one lease at a time and forgets it the moment you close the tab. AuditLease keeps the whole register: bulk import, group consolidation, mandatory judgement documentation, an immutable audit trail, and statutory disclosure notes. Auditors get read-only access free.
How the calculation works
Under FRS 102 as amended by the FRC's 2024 periodic review, a lessee no longer splits leases into operating and finance. For accounting periods beginning on or after 1 January 2026, most leases go on the balance sheet. There are two figures to get right, and one of them is easy to get wrong.
1. The lease liability
The liability is the present value of the lease payments — not their total. Each payment is discounted back at the rate implicit in the lease where that is readily determinable, and at the lessee's incremental borrowing rate where it is not. For most lessees it is not, so the IBR is what ends up being used.
Two details move the number materially. Rent paid in advance is discounted one period less than the same rent paid in arrears, so it produces a larger present value. And a payment falling due on the commencement date itself is excluded from the liability entirely — it has already left the bank, so it is capitalised into the right-of-use asset instead.
2. The right-of-use asset
The asset starts at the liability and then picks up everything else you spent to get the lease in place:
- plus any payment made on or before commencement,
- plus initial direct costs — agents' and solicitors' fees,
- plus the discounted cost of any obligation to restore the property,
- less any lease incentives received from the landlord.
It is then depreciated on a straight-line basis over the shorter of the lease term and the asset's useful life.
3. Why the P&L gets worse before it gets better
An operating lease used to produce a flat rental charge. The replacement is straight-line depreciation plus interest on a liability that is at its largest on day one. Add those together and the charge is front-loaded: higher than the old rent in the early years, lower in the later ones, identical in total. On a covenant tested against EBITDA the direction of travel is the other way, because rent leaves operating costs and reappears below the line as depreciation and interest.
Common questions
When do the FRS 102 lease changes apply?
Accounting periods beginning on or after 1 January 2026, with early application permitted provided every amendment from the periodic review is applied at the same time. For a 31 December year end, the first affected accounts are those for the year ending 31 December 2026 — which means the transition work lands in 2026 and the audit questions arrive in early 2027.
Does FRS 102 still distinguish operating from finance leases?
Not for lessees. That distinction is removed and most leases are recognised on balance sheet, broadly in line with IFRS 16. Lessors still classify their leases.
Is the lease liability just the total of the rents?
No, and this is the most common error. It is the discounted present value of those rents. The gap between the two is interest, and it is recognised over the term as the liability unwinds.
What about a rent-free period?
A rent-free period is simply a run of zero payments in the schedule — enter it in the advanced section. There is no need to straight-line it separately as you would have done for an operating lease, because the effect is already in the present value. If you were previously straight-lining, you will have an accrual on the balance sheet that needs dealing with on transition.
Are any leases exempt?
Short-term leases of 12 months or less with no purchase option, and leases of low-value assets, can stay off balance sheet and continue to be expensed straight-line. Applied consistently by class of asset, and disclosed. It is worth checking before doing any of this work.
Can I trust these numbers?
The arithmetic is covered by a test suite of 66 cases, including textbook annuity checks and a proof that every schedule amortises to exactly zero and every journal balances. What we cannot check for you are the judgements you fed in. Review the output before it reaches a set of financial statements.