IDEAS home Printed from
   My bibliography  Save this article

Financial Reporting And Tax Implications Of Real Estate Lease


  • Snežana Miletić

    (University of Belgrade Faculty of Economics)

  • Savka Vučković Milutinović

    (University of Belgrade Faculty of Economics)


Leasing is a very popular way of acquiring fixed assets, but despite its importance and presence the users of financial statements are often not in a position to realistically consider reporting entity's lease transactions and their impact on entity's financial position and performance. For years, current financial reporting for leases has been subject to many critiques. The reason for this primary lies in the fact that it left a lot of opportunities for manipulation during the lease classification into finance and operating leases, whereby the former must be reported on balance sheet, and the latter remains off it. Bearing in mind that operating leases have favourable effects on lessee financial statements and a number of accounting ratios, the practice of lessee to deliberately structure lease contracts to circumvent capitalisation of requirements was noticed. Attempts to reform lease accounting have been intensified and their termination might be expected in a form of a new approach, which would be based on the "right of use" model, hence leading to reporting of almost all leases on balance sheet. Nevertheless, numerous dilemmas complicate the process of achieving comprehensive solutions. It should be considered that radical changes in lease accounting could have effects on lease taxation as well, particularly in the countries where stronger relationship between financial and tax reporting exists. It is also important to recognize the effect of a new approach to lease accounting from the sale and leaseback perspective. This transaction is particularly attractive in the conditions of economic crisis, primary because it enables companies to achieve liquid assets. However, if leases are classified into operating ones, favourable effects on financial reporting seller/lessee should not be neglected either.

Suggested Citation

  • Snežana Miletić & Savka Vučković Milutinović, 2013. "Financial Reporting And Tax Implications Of Real Estate Lease," Serbian Association of Economists Journal, SAE - Serbian Association of Economists, issue 3-4, pages 256-272, May.
  • Handle: RePEc:srb:journl:y:2013:i:3-4:p:256-272

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    real estate lease; finance lease; operating lease; lease accounting limitations; right of use model; leasing taxation; sale and leaseback;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:srb:journl:y:2013:i:3-4:p:256-272. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Milos Stamatovic) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.