BLM23050 - Defining long funding leases: commencement and transition: pre-existing heads of agreement: lessee's side, lessor's side and lessee

This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.

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»Ê¹ÚÌåÓýapp term 'lessee's side' is defined in FA06/SCH8/PARA27 to mean

  • the lessee,
  • a person who controls (or is to control) the lessee,
  • any two or more persons who together control (or are to control) the lessee.

»Ê¹ÚÌåÓýapp ‘lessor’s sideâ€� is defined in similar terms.

This means that there may be a pre-existing heads of agreement when neither the lessor nor the lessee yet exists.

However, the lessee must be identified precisely as a particular (unique) entity. A description such as ‘a wholly owned subsidiary of …� does not by itself identify a particular lessee because there could be more than one wholly owned subsidiary.

»Ê¹ÚÌåÓýapp lessor does not have to be identified precisely. This means that a lessor group could set up or identify a special purpose vehicle to act as lessor subsequent to the pre-existing heads of agreement.