Operational Lease on the balance sheet

Operational Lease, is it on your balance sheet?

When taking out an Operational Lease, the car is not on your balance sheet. This type of lease is considered as an off-balance financing form, meaning it is not included in your financial track record. This means that as a business owner, you do not have the ability to include depreciation, interest deductions, or investment deductions as expense items on your balance sheet for the leased vehicle. On the other hand, the lease instalments can be deducted from turnover as an expense, which has positive implications for tax payments.

An important advantage of Operational Lease is that it does not affect your company's financial ratios. As a result, debt capital does not increase, leaving your company's creditworthiness intact for any future financing needs.

How do you account for Operational Lease in the income statement?

Although an Operational Lease does not appear on the balance sheet, it is important for the tax authorities to understand the payment obligations you have entered into. This is done by recording the lease instalments as an expense in the income statement. For example, when entering into a lease contract for a company car, the monthly lease rates are directly booked as an expense item, including any VAT that be reclaimed at a later time. This ensures a clear and transparent presentation of the costs related to the lease in the financial accounts.

How should you account for Operational Lease in the financial statements?

When preparing the financial statements, it is necessary to provide an explanation of all leases entered into during the year. For Operational Lease, this involves giving a detailed overview of all lease obligations, including a forecast of the charges for results for the coming years. This provides both an insight into the current financial situation and an outlook on future financial obligations.