11 Nov 2026 · Lease102

A discount rate without a date and a term is a number, not evidence.

The discount rate is the one figure in a lease liability that is not written in the lease. The rent, the dates and the options can each be traced to a clause. The rate has to be built, and at the first year-end somebody will ask how.

FRS 102 gives the rate four attributes. A file that records all four answers most of the questions before they are asked.

Its type. The rate implicit in the lease if that can be readily determined; otherwise the lessee's incremental borrowing rate or its obtainable borrowing rate, chosen lease by lease (paragraph 20.49). The note to the accounts states the types used and the proportion of the liability under each (paragraph 20.77(c)).
Its day. The commencement date for a new lease (paragraph 20.49). The date of initial application for a lease already running at transition (paragraph 1.51(a)). The date of the reassessment or the modification where the term later changes (paragraphs 20.67 and 20.71(c)). A rate taken for any other day is a different rate.
Its term and amount. The obtainable borrowing rate is defined as the rate to borrow "over a similar term, an amount similar to the total undiscounted value of lease payments". A three-year vehicle lease and a fifteen-year property lease, measured on the same day for the same business, are not borrowings over a similar term.
Its borrower. It is the rate this lessee would pay, so part of it is the business's own credit standing: a bank quote, a facility letter, or an assumption stated as an assumption.

Set "Bank Rate plus 2%" against that list. It names no type and belongs to no day. Bank Rate is a policy rate with no term, and the 2% has no source. It may give a reasonable figure. It cannot be re-performed.

A file that can be re-performed holds, for each lease: the rate's type, the day it was taken for and why that day governs, the published market rates it started from, the margin and what the margin rests on, and the arithmetic in between.

Lease102 keeps that file as it goes. It works out which day governs each lease and suggests an obtainable borrowing rate from the Bank of England's published SONIA swap curve for that day, priced over the lease's own payments, plus a credit spread. It stores how the rate was built. Show the working lists every payment with the curve rate applied to it, and downloads with the formulas written out, so the rate can be rebuilt from the Bank's own file. A bank quote can be recorded on the lease with its letter, and the margin it evidences used in place of the default. A rate you enter yourself is recorded as entered, with that shown as its source.

A discount rate without a date and a term is a number, not evidence.

FRS 102 gives the rate four attributes. A file that records all four answers most of the questions before they are asked.

Its type. The rate implicit in the lease if that can be readily determined; otherwise the lessee's incremental borrowing rate or its obtainable borrowing rate, chosen lease by lease (paragraph 20.49). The note to the accounts states the types used and the proportion of the liability under each (paragraph 20.77(c)).
Its day. The commencement date for a new lease (paragraph 20.49). The date of initial application for a lease already running at transition (paragraph 1.51(a)). The date of the reassessment or the modification where the term later changes (paragraphs 20.67 and 20.71(c)). A rate taken for any other day is a different rate.
Its term and amount. The obtainable borrowing rate is defined as the rate to borrow "over a similar term, an amount similar to the total undiscounted value of lease payments". A three-year vehicle lease and a fifteen-year property lease, measured on the same day for the same business, are not borrowings over a similar term.
Its borrower. It is the rate this lessee would pay, so part of it is the business's own credit standing: a bank quote, a facility letter, or an assumption stated as an assumption.