leasing represents a method of acquiring capital goods or assets (tangible or intangible) as an alternative to purchasing from third parties or producing (construction) in-house.
Leasing is an "atypical" commercial contract as it is not covered by the civil code.
In accounting and tax matters, there are two leasing accounting methodologies:
- the equity method (or fees);
- the financial method.
The patrimonial method (or fees) is the one used in Italy. In this case the asset remains the property of the granting company: it will therefore continue to appear in its assets of the balance sheet. The entrepreneur/user company does not record the asset among the fixed assets but records the commitment undertaken contractually in the memorandum accounts: goods leased (debit) to leasing company commitment account (credit). In the income statement, however, the latter records the periodic leasing payments as resulting from the passive invoices received. Often the leasing contract provides for the payment of a large initial fee: it is a sort of down payment on the overall value of the asset which in some cases can reach percentages of 20/25%. This maxi fee cannot be completely attributed to the financial year in which it manifested itself. Why? Because to respect the principle of economic accrual it is necessary to distribute this value for the entire duration of the contract through the deferral technique. However, you must be very careful: for each financial year you must "reopen" the prepaid expenses account in order to extinguish the account opened in the previous period and thus charge the residual amount to the following financial year. If the operation is carried out correctly in the last financial year, the prepaid expenses ledger will have a balance equal to zero.
The entrepreneur/user company will register the asset in the balance sheet only if, at the end of the contract, it decides to exercise the redemption. In this case the invoice will be recorded using an asset account (machinery, equipment, etc. depends on the subject of the contract). This asset will then be subject to depreciation according to ordinary rules. However, keep in mind that the redemption is often set at a very low price (almost symbolic) so if this is less than 516.00 euros there will be no amortization (why? Because the TUIR provides for the possibility of fully allocating the cost of capital goods whose value is less than €516.00 to the financial year.
In the financial method, however, the leasing operation is accounted for (from the point of view of the entrepreneur/user company) as if it were the purchase of an asset through recourse to external financing, with payment in installments. Attention: this is the method envisaged by international accounting standards, IAS 17 in this case, in the case of financial leasing. In the case of operating leasing, however, IAS 17 provides the same accounting rules that we have already seen in the operating method.
