Whilst we offer our full suite of finance products to our public sector customers, there are those (notably within education) who are restricted to the type of agreement that they can enter into.
For those bodies that central government have prescribed must only enter into IAS17 compliant operating leases, it is worth just explaining just what that means.
IAS stands for “International Accounting Standards” and regulation 17 details what constitutes the two main forms of lease – finance lease and operating lease. It is this definition that central government use to determine if a lease complies as a true operating lease.
The key points to an IAS17 compliant operating lease are:-
- Ownership cannot form part of the agreement from the outset or otherwise
- The funder takes a residual interest in the assets on the agreement
- The term of the lease cannot be for the “major part of the economic life of the asset”
The practical implications of this are:-
- Only assets with suitable residual value can be considered
- The term of the agreement needs to shorter than the intended life of the asset
- Assets will be need to be returned to the funder at the end
We can work with you to align a finance solution that achieves your objectives even where it appears that your circumstances do not match the criteria outlined here.