FRS 102 Lease Accounting Glossary of Terms

Definitions of key terms used in FRS 102 lease accounting and the Lease102 platform. Terms are organized by category for easy reference.

Acronyms & Abbreviations

Common abbreviations used throughout Lease102 and FRS 102 documentation:

Acronym	Full Name	Definition
APR	Annual Percentage Rate	The yearly cost of borrowing expressed as a percentage, including fees and compound interest
BoE	Bank of England	UK central bank that publishes SONIA and other reference rates
CPI	Consumer Price Index	UK measure of inflation published by ONS; commonly used for index-linked rent adjustments
CTA	Corporation Tax Act	UK legislation (CTA 2010) governing tax treatment of leases
EBITDA	Earnings Before Interest, Taxes, Depreciation & Amortisation	Profitability metric; higher under FRS 102 as rent is replaced by depreciation/interest
ERP	Enterprise Resource Planning	Business software systems (e.g., Xero, Sage) that Lease102 integrates with
FLA	Finance Lease Asset (deprecated)	Legacy term for the Right-of-Use Asset; now replaced by ROU Asset terminology under FRS 102 Section 20
FRC	Financial Reporting Council	UK body responsible for issuing FRS 102 and other accounting standards
FRS	Financial Reporting Standard	UK accounting standards; FRS 102 is the main standard for UK entities
GAAP	Generally Accepted Accounting Principles	Framework of accounting rules; UK GAAP includes FRS 102
GL	General Ledger	Main accounting record where journal entries are posted
HMRC	His Majesty's Revenue & Customs	UK tax authority; determines tax treatment of leases
IBR	Incremental Borrowing Rate	Rate to borrow funds with similar security for a similar asset; used when implicit rate unknown
IFRS	International Financial Reporting Standards	International accounting standards; IFRS 16 is the lease equivalent of FRS 102.20
NPV	Net Present Value	Sum of discounted future cash flows minus initial investment
OBR	Obtainable Borrowing Rate	FRS 102-specific rate: rate to borrow total undiscounted lease payments; default for SMEs
ONS	Office for National Statistics	UK government body publishing CPI, RPI, and other indices
P&L	Profit and Loss	Income statement showing revenues, expenses, and profit
PV	Present Value	Current value of future cash flows discounted at an appropriate rate
RLS	Row-Level Security	Database security ensuring tenant data isolation in Lease102
ROU	Right-of-Use	Alternative name for ROU Asset; term used in IFRS 16
RPI	Retail Price Index	UK inflation measure; historically used for commercial rent reviews
SME	Small and Medium Enterprise	Target market for FRS 102; companies below IFRS thresholds
SONIA	Sterling Overnight Index Average	Bank of England overnight reference rate; base for OBR calculations
TIA	Tenant Improvement Allowance	Cash or works provided by landlord for tenant fit-out; a lease incentive
VAT	Value Added Tax	UK consumption tax; may apply to lease payments
XNPV	Excel Net Present Value	Excel function for calculating PV with irregular dates; Lease102 matches this

Core Lease Accounting Terms

Fundamental FRS 102 Section 20 concepts:

Term	Definition	FRS 102 Ref
Amortisation	The process of spreading the lease liability over the lease term. Each period, interest accrues on the opening balance, and the payment is split between interest expense and principal reduction.	20.49
Amortisation Schedule	Period-by-period breakdown showing opening balance, interest, payment, principal reduction, and closing balance for both liability and asset.	20.49
Commencement Date	The date when the lessor makes the underlying asset available for use by the lessee. This is when initial measurement occurs–not the contract signing date.	20.45
Depreciation	Systematic allocation of the ROU Asset cost over the lease term (or useful life if shorter). Typically straight-line unless another basis better reflects the benefit pattern.	20.57-20.58
ROU Asset	The asset recognised on the balance sheet representing the lessee's right to use the underlying asset. Initially equals lease liability plus direct costs minus incentives plus restoration. Also called Right-of-Use (ROU) Asset.	20.46-20.48
Initial Measurement	Day 1 calculation of lease liability (PV of payments) and ROU Asset (liability adjusted for costs and incentives).	20.46-20.49
Interest Expense	The financing cost recognised each period, calculated as opening lease liability multiplied by the periodic discount rate.	20.63
Lease	A contract that conveys the right to use an asset for a period of time in exchange for consideration.	20.15
Lease Liability	Present value of all future lease payments at commencement date. Includes fixed payments, in-substance fixed, variable payments based on index, residual guarantees, and option payments if reasonably certain.	20.49
Lease Term	Non-cancellable period plus periods covered by extension options reasonably certain to be exercised, minus periods covered by termination options reasonably certain to be exercised.	20.38
Lessee	The party that obtains the right to use an underlying asset under a lease (the tenant).	20.45
Lessor	The party that provides the right to use an underlying asset under a lease (the landlord).	20.86
Present Value	The current worth of future cash flows, calculated by discounting each payment by the appropriate rate for the time until payment.	20.49
Principal Reduction	The portion of each lease payment that reduces the liability balance (payment minus interest expense).	20.62(b)
Subsequent Measurement	Day 2+ accounting: interest accrual on liability, principal reduction via payments, and depreciation of the asset.	20.55-20.64
Underlying Asset	The asset that is the subject of the lease (for example a building, vehicle or item of equipment).	Glossary

Discount Rate Terms

Terminology related to the rate used to calculate present value:

Term	Definition	FRS 102 Ref
Base Rate	The risk-free reference rate used as the foundation for calculating OBR. For UK: SONIA; for Ireland: €STR; for US: SOFR.	20.49
Credit Profile	Assessment of the lessee's creditworthiness used to determine the appropriate credit spread. Categories: Strong, Average SME, Higher Risk.	20.49
Credit Spread	The additional percentage added to the base rate to reflect credit risk. The default profiles are illustrative starting points, from +1.25% (strong) to +3.50% (higher risk); evidence your own spread.	20.49
Discount Rate	The annual interest rate used to calculate the present value of future lease payments. Higher rate = lower liability.	20.49
Implicit Rate	The interest rate that causes the PV of lease payments plus unguaranteed residual to equal fair value plus lessor's direct costs. Rarely determinable by lessees.	20.49
Incremental Borrowing Rate (IBR)	The rate the lessee would pay to borrow funds to purchase an asset of similar value with similar security over a similar term.	20.49
Obtainable Borrowing Rate (OBR)	FRS 102-unique concept: the rate the lessee would pay to borrow the total undiscounted lease payments. Simpler than IBR for SMEs.	20.49
Periodic Rate	The discount rate for a single period (e.g., monthly rate = annual rate ÷ 12).	-

Lease Component Terms

Items that adjust the ROU Asset or create additional liabilities:

Term	Definition	Impact
Break Option Penalty	Payment due if exercising a break clause to exit the lease early.	+Lease Liability (if reasonably certain)
Broker Commission	Fees paid to agents or brokers for securing the lease.	+ROU Asset (direct cost)
Cash Incentive	Direct cash payment from lessor to lessee as inducement to sign.	−ROU Asset (incentive)
Dilapidations	UK property term for the obligation to restore premises to original condition at lease end. Includes reinstatement, repairs, and redecoration.	+ROU Asset, +Section 21 Provision
Fit-Out Contribution	Landlord payment towards tenant improvements or fitting out premises (TIA).	−ROU Asset (incentive)
Initial Direct Costs	Incremental costs directly attributable to negotiating and arranging the lease. Includes legal fees, broker commissions, and surveys.	+ROU Asset
Lease Incentive	Any benefit received from lessor: rent-free periods, fit-outs, cash payments, below-market rent. Reduces ROU Asset, not liability.	−ROU Asset
Legal Fees	Solicitor fees for lease negotiation and documentation.	+ROU Asset (direct cost)
Make-Good Obligation	Requirement to restore premises to original condition at lease end. Same as dilapidations.	+ROU Asset, +Section 21 Provision
Make-Good Provision	Obligation to return premises to original condition; same as dilapidations.	+ROU Asset, +Section 21 Provision
Moving Cost Reimbursement	Landlord reimbursement for tenant relocation expenses.	−ROU Asset (incentive)
Rent Deposit	Security payment held by landlord; accounted for under Section 11 as a financial asset, not part of lease liability.	+Rent Deposit Asset (Section 11)
Rent-Free Period	Initial period with zero rent as incentive. Value included at PV at commencement.	−ROU Asset (incentive)
Residual Value Guarantee	Lessee's guarantee that asset value at lease end will meet minimum. Include expected payment amount only.	+Lease Liability
Restoration Costs	Estimated cost to dismantle, remove, or restore asset at lease end.	+ROU Asset, +Section 21 Provision
Section 21 Provision	FRS 102 Section 21 provision for restoration/dilapidation obligations. Separate liability from lease liability.	Creates provision liability
Service Charge	Non-lease component for building services (maintenance, cleaning, insurance). Can be separated or combined with rent via practical expedient.	Expense or +Lease Liability
Stamp Duty	UK property transfer tax on lease execution.	+ROU Asset (direct cost)
Survey Costs	Building surveys and valuations before lease signing.	+ROU Asset (direct cost)

Payment & Schedule Terms

Terms related to lease payments and timing:

Term	Definition
Advance Payment	Payment made at the start of each period (beginning of month/quarter/year). Lease102 assumes advance for a lease paid on the Quarter Days unless the lease states otherwise.
Agreed Rent	The contractually agreed base rent payment amount.
Arrears Payment	Payment made at the end of each period (end of month/quarter/year). Lease102 assumes arrears for a lease not paid on the Quarter Days unless the lease states otherwise.
Base Rent	The fixed periodic payment amount, excluding variable elements.
Contractual Increase	Pre-agreed rent increase specified in the lease contract.
CPI/RPI Adjustment	Rent change linked to Consumer or Retail Price Index.
Fixed Payment	Payments that are set amounts, not varying with indices or usage.
Gale Day	Irish Quarter Day based on Celtic calendar (Feb 1, May 1, Aug 1, Nov 1).
Index-Linked Payment	Payments that adjust based on CPI, RPI, or market rent reviews. Include at current value; remeasure using original rate.
Initial Payment	First payment at lease commencement, often different from regular payments.
In-Substance Fixed	Payments that appear variable but are effectively fixed (e.g., guaranteed minimum). Include in liability.
Lady Day	March 25 - English Quarter Day marking the Feast of the Annunciation.
Market Rent Review	Adjustment to current market rates, typically for property leases.
Michaelmas	September 29 - English Quarter Day marking the feast of St Michael.
Payment Frequency	How often payments occur: weekly, monthly, quarterly, semi-annually, or annually.
Payment Schedule	Full list of payments over lease term, potentially with different amounts at different dates.
Quarter Day	Traditional UK/Irish property payment dates creating irregular intervals (87-97 days). See English, Scottish, and Irish calendars.
Stepped Rent	Payments that change at predetermined dates (e.g., £2,000/mo years 1-2, then £2,500/mo).
Usage-Based Payment	Payments based on usage (sales, production, mileage). Exclude from liability; expense as incurred.
Variable Payment	Any payment that is not fixed. May or may not be included in liability depending on type.

Options & Modifications

Terms related to lease options and changes:

Term	Definition	FRS 102 Ref
Break Clause	Lessee's option to terminate lease early, typically with notice period and/or penalty.	20.38(c)
Extension Option	Lessee's right to extend the lease beyond the initial term. Include if reasonably certain to exercise.	20.38(b)
Renewal Option	Alternative term for extension option. Lessee's right to extend the lease beyond the initial term.	20.38(b)
Lease Modification	Change to lease terms after commencement (scope, term, payment). May require remeasurement.	20.70-20.73
Purchase Option	Lessee's right to buy the underlying asset. Include if reasonably certain to exercise.	20.51(d)
Rate Revision	Requirement to use revised discount rate for certain modifications (term changes, non-index payment changes).	20.71(c)
Reasonably Certain	Assessment of whether lessee will exercise an option. Consider economic incentives, past practice, penalties.	20.41-20.44
Remeasurement	Recalculating lease liability and asset following a modification or reassessment.	20.70-20.73
Scope Change	Modification adding or removing the right to use assets.	20.70
Termination Option	Lessee's right to end lease before contractual end date.	20.38
Termination Penalty	Payment required if lessee exercises termination option. Include if termination reasonably certain.	20.51(e)

Calculation Methodology

Technical terms for how calculations are performed:

Term	Definition
30/360	Day count convention assuming 30 days per month and 360 days per year. Banking standard.
Act/365 (XNPV)	Day count convention using actual days and 365-day year. Excel XNPV compatible; Lease102 default.
Act/Act	Day count convention using actual days and actual days in year. Most precise but complex.
Compounding Frequency	How often interest is calculated and added to principal: monthly, quarterly, or annually.
Day Count Convention	Method for calculating number of days between payment dates for interest accrual.
Discount Factor	The multiplier used to convert future value to present value: 1 ÷ (1 + rate)^periods.
ROUND_HALF_UP	Rounding method used for monetary values: 0.005 rounds to 0.01 (banker's rounding).
Straight-Line Depreciation	Depreciation method where equal amounts are charged each period (asset ÷ term).
Year Fraction	Portion of year between two dates, calculated per the day count convention.

FRS 102 Transition

Terms specific to adopting FRS 102 Section 20 for existing leases:

Term	Definition	FRS 102 Ref
Comparatives	Prior period figures restated under new standard. FRS 102 permits no restatement for leases.	1.47
Full Retrospective	Applying a new standard as if always in effect. Not available for the FRS 102 lease amendments: comparatives are never restated.	-
Modified Retrospective	Mandatory transition method: recognise liability at PV of remaining payments; asset = liability adjusted by prepaid/accrued balances. No historical recalculation, no comparative restatement.	1.47-1.53
Opening Balance	Lease liability and asset amounts recognised at transition date.	1.51
Pre-Transition Accrued	Rent accrual at transition date (unpaid rent or straight-lining balance). Reduces the opening ROU Asset and is derecognised.	1.51(b)
Pre-Transition Prepaid	Rent paid in advance at transition date. Increases the opening ROU Asset and is derecognised.	1.51(b)
Prepaid/Accrued Reclassification	Counterpart to the prepaid or accrued balance absorbed into the ROU Asset; cleared against the old prepayment/accrual account, not retained earnings.	1.51(b)
Transition Date	First day of first reporting period applying FRS 102 Section 20 (e.g., 1 Jan 2026 for Dec year-end).	1.47
Transition Lease	Lease that existed before FRS 102 adoption and requires transition accounting.	1.47

Exemptions & Classification

Terms for leases that may receive simplified treatment:

Term	Definition	FRS 102 Ref
Finance Lease (Lessor)	Lease that transfers substantially all risks and rewards of ownership to lessee. Lessor derecognises asset.	20.87, 20.93
Head Lease	The original lease when lessee subleases to a third party.	20.92
Intermediate Lessor	Lessee who subleases to another party; accounts for head lease as lessee and sublease as lessor.	20.92
Low-Value Asset	Asset that qualifies for expense treatment. Determined by TYPE (not monetary value). Laptops and tablets may qualify; vehicles and property never qualify.	20.5-20.12
Low-Value Exemption	Election to expense low-value asset leases instead of recognising liability. Cannot be used if asset is subleased.	20.5-20.12
Operating Lease (Lessor)	Lease that does not transfer substantially all risks and rewards. Lessor retains asset on balance sheet.	20.87, 20.106
Short-Term Exemption	Election to expense leases ≤12 months (with no purchase option) instead of recognising liability.	20.5(a), 20.6
Short-Term Lease	Lease with term of 12 months or less at commencement, with no purchase option.	Glossary; 20.5(a)
Sublease	Lease where original lessee becomes lessor to a new tenant. Classify against ROU Asset, not underlying asset.	20.92
Practical Expedient	Permitted simplification under FRS 102, such as combining fixed service charges with lease payments instead of separating them.	20.33

UK Regulatory & Tax Terms

UK-specific regulatory and tax terminology:

Term	Definition
Capital Allowances	Tax relief on capital expenditure. Available for 'long funding leases' instead of rent deduction.
Companies Act 2006	UK legislation requiring 7-year retention of accounting records including lease data.
Corporation Tax	UK tax on company profits. Lease accounting affects taxable profit calculation.
CTA 2010	Corporation Tax Act 2010; contains rules for tax treatment of leases.
General Lease	Standard lease for tax purposes; lessee claims rent deduction (most common treatment).
Long Funding Lease	HMRC classification for leases exceeding certain thresholds; lessee claims capital allowances instead of rent.
Rent Deduction	Tax relief by deducting lease payments from taxable profits (general lease treatment).
Section 21	FRS 102 Section 21 covering provisions, contingent liabilities, and contingent assets. Applies to restoration obligations.
Section 20	FRS 102 Section 20 covering lease accounting for lessees and lessors.
UK GAAP	UK Generally Accepted Accounting Principles, comprising FRS 100-105 and related guidance.

Platform & System Terms

Lease102-specific terminology:

Term	Definition
Active	Lease status indicating the lease is currently in effect with scheduled payments.
Active Lease	Lease currently in effect and included in all reporting.
Audit Trail	Complete history of all changes to lease records, including user, timestamp, and details.
Concluded	Lease status indicating the lease has reached its expected end date. A rolling hire is never Concluded on its end date; see Rolling hire.
Cost Centre	Organisational unit for allocating lease expenses to departments.
Draft	Lease status indicating the record is created but not yet activated or calculated.
Draft Lease	Lease not yet activated; excluded from reports until activated.
ERP Integration	Connection between Lease102 and accounting systems (Xero, Sage, D365BC) for journal posting.
GL Mapping	Configuration linking FRS 102 account types to your chart of accounts.
Pending Deletion	Lease status indicating the lease is marked for removal, awaiting confirmation.
Portfolio	Group of leases sharing common characteristics or rate settings.
Rolling hire	A hire that continues until one party gives notice. Its end date holds the enforceable term, which is the notice period, and the record stays Active until you record the date the hire ended.
Soft Delete	Data marked as deleted but retained for audit purposes. Lease102 never hard-deletes.
Tenant (Platform)	Organisation using Lease102; all data is isolated per tenant.
Transitioned	Lease status indicating the lease was migrated from previous accounting treatment under FRS 102 transition.
User Role	Permission level: Owner (full access), Admin, Accountant (edit), Viewer (read-only).

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