Jurisdiction(s):
United Kingdom

Key definition

Applicable accounting standards definition

What does Applicable accounting standards mean? In practice, applicable accounting standards are the accounting rules a company must apply when preparing its statutory accounts. The term is used in legislation, including the Companies Act 2006 (UK) and the Companies Act 2014 (Ireland), which require directors to state in the notes whether the accounts comply with applicable accounting standards and to disclose any material departures, subject to limited exemptions for small entities. Compliance sits alongside the overarching true and fair view requirement. For UK Companies Act accounts, applicable accounting standards are those issued by the prescribed body, currently the Financial reporting Council (frc), principally UK and...

Operating and finance leases under FRS 102 (UK and Republic of Ireland): structures, risk allocation and 2026 lessee accounting changes

Published by a LexisNexis Banking & Finance expert

Practice notes

Operating leases

Under FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland), a lease is regarded as an operating lease where it does not pass substantially all risks and rewards incidental to ownership of the underlying asset to the lessee during the arrangement.
A pure operating lease gives the lessee the right to use an asset for the lease term in exchange for rent paid to the lessor during that period. When the term ends, the lessee must hand the asset back to the lessor and holds no continuing legal or economic stake in its residual value thereafter.
For an operating lease, exposure to asset or equipment risk sits with the lessor, not the lessee, for the duration of the lease term, which is typically for a period of less than ten years throughout the agreement.
A synthetic operating lease is one that, while structured to fund the lessee’s eventual purchase of the asset, is nonetheless accounted for as an operating lease in accordance with the applicable accounting standards...

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Web page updated on 21/05/2026

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