Quick qn re accounting for leasehold interests

Cyrus

Got an fae assignment to complete and im in work and havent got the time to look this up!

Is this the correct acc treatment for a leasehold interest (21 yrs) in a building:

1) Dr Fixed assets Cr Bank with the cost of the interest say 100k

2) Write off the fixed asset over the lifetime of the lease

3) Expense the rent charge to the P&L every year

Seems a bit basic, is there more to it than that?

MG

Sounds like you are double counting the cost in the P&L to me. Might be different for a long lease but wouldn't you treat it like an ordinary finance lease?

Dr Fixed Assets with asset value Cr Lease liab (asset Value + Interest) Dr Lease Interest suspense with interest

Depreciate Fixed Asset value over the 21 yrs

Then Cr Bank with rent Dr Lease Liab and release a portion of the lease interest suspense to the P&L

Cyrus

I dont think im double counting the cost as there is normally a cost involved in buying a leasehold interest (which is basically spread over the life of the interest) as well as a rent element??!!??