See Your FRS 102 Impact
Calculate how the new lease accounting standard affects your balance sheet, EBITDA, and profit. No signup required.
Enter Your Lease Details
Total annual rent for a single lease or your entire portfolio
Your obtainable borrowing rate (OBR). Typically SONIA + credit spread.
Assumptions: Present value of annual payments in arrears at the discount rate entered, with annual compounding. ROU Asset equals the lease liability (no incentives, direct costs, or restoration provision). Straight-line depreciation over the lease term. This reflects a modified retrospective approach under FRS 102 Section 20.
New Lease Liability
£432,948
This debt appears on your balance sheet from Day 1
EBITDA Increase
+£100,000
Rent moves below the EBITDA line (now depreciation + interest)
Year 1 P&L Comparison
Why is Year 1 profit lower?
Under FRS 102, your lease is treated like a mortgage: a large liability at the start that you pay down over time. This creates a "front-loading" effect on your P&L.
Depreciation is flat
You write off the asset evenly: £86,590 every year.
Interest reduces over time
Interest is calculated on your remaining debt. Year 1: £21,647. By Year 5: near zero.
| Year | Old (Rent) | New (Dep + Int) | P&L Impact |
|---|---|---|---|
| Year 1 | £100,000 | £108,237 | -£8,237 |
| Year 2 | £100,000 | £104,319 | -£4,319 |
| Year 3 | £100,000 | £100,206 | -£206 |
| Year 4 | £100,000 | £95,887 | +£4,113 |
| Year 5 | £100,000 | £91,351 | +£8,649 |
| Total | £500,000 | £500,000 | £0 |
Key takeaway: Over the full 5 years, the total expense is exactly the same. You're not losing money – you're recognising the cost earlier in the lease term rather than spreading it evenly. The "crossover" happens around Year 4, when the new method becomes more favourable.
Simplified estimate. Actual calculations depend on payment timing, escalation clauses, incentives, and other lease terms. Read our FRS 102 Section 20 guide for the full methodology, or use Lease102 for accurate compliant calculations.
Choosing the discount rate
The rate is the input auditors question most. FRS 102 asks for the rate implicit in the lease where it can be readily determined (mainly hire-purchase and vehicle deals). Where it cannot, you choose, lease by lease, between the incremental borrowing rate and the obtainable borrowing rate (OBR): the rate you would pay to borrow the total payments under the lease (FRS 102.20.49).
You have a bank facility
Your facility rate is usually an acceptable OBR proxy. Document the facility terms alongside the lease.
You have no borrowing
Use a recent loan quote, or a reference-rate base (SONIA for sterling, €STR for euro) plus a credit spread appropriate to your business.
Either way
Set the rate at each lease's commencement date and keep the evidence. Lease102 stores the rate type, value and basis per lease, with live SONIA and €STR references.
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Lease calculator: frequently asked questions
How do I calculate a lease liability under FRS 102?
The lease liability is the present value of the remaining lease payments, discounted at the rate for the lease (FRS 102.20.49). For a simple annual rent, discount each year's payment back to today at your rate and sum them, which is what this calculator does. Real leases add complications: monthly payments in advance, rent-free periods, incentives and index-linked uplifts, which is where dedicated software takes over.
What discount rate should I use in a lease calculator?
Most UK and Irish SMEs use the obtainable borrowing rate (OBR), one of the two alternatives FRS 102.20.49 allows where the rate implicit in the lease cannot be readily determined: the rate you would pay to borrow the total payments under the lease. In practice that is evidenced from an existing bank facility rate, a recent loan offer, or a reference-rate base (SONIA for sterling, €STR for euro) plus a credit spread, documented at the lease commencement date.
Why does my Year 1 profit fall even though the cash rent is unchanged?
Because the flat rent expense is replaced by straight-line depreciation plus interest on the lease liability, and interest is highest at the start when the liability is largest. Total expense over the whole lease is identical; it is simply front-loaded. The calculator's year-by-year table shows the crossover year where the new method becomes favourable.
How do rent-free periods and incentives affect the numbers?
A cash or fit-out contribution received at or before commencement reduces the right-of-use asset, not the lease liability (FRS 102.20.47(b)). A rent-free period works differently: those months are part of the lease term and simply carry no payment, so they lower the payments discounted into the liability (FRS 102.20.37, 20.51(a)). The liability is always the present value of the remaining payments. This simplified calculator assumes no incentives; Lease102 itself handles them in the compliant position.
Is this calculator FRS 102 compliant?
It is a deliberately simplified estimate for orientation: annual payments in arrears, annual compounding, no incentives, direct costs or restoration provisions. Compliant figures need day-count precision, actual payment schedules and the full right-of-use asset build-up, which the Lease102 platform calculates using Act/365 present value on your real payment dates.
Related Resources
FRS 102 Guide
Complete reference for FRS 102 Section 20 lease accounting rules and transition requirements.
Learn moreFRS 102 Section 20, explained
Recognition, the recognition exemptions, measurement, discount rates and disclosures.
Learn moreDocumentation
Learn how to use Lease102 for audit-ready calculations, journal entries, and disclosures.
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