IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 6, Issue 4. Ver. II (Jul. - Aug. 2015), PP 18-21 www.iosrjournals.org DOI: 10.9790/5933-06421821 www.iosrjournals.org 18 | Page Lease Accounting Methodology: A Theoretical Reflection Loveday A. Nwanyanwu (PhD, FCA, FCTI) Senior Lecturer: Department of Accountancy, Rivers State University of Science and Technology, Port Harcourt, Federal Republic of Nigeria. Abstract: The purpose of this paper is to examine lease accounting methods and x-ray how they influence a choice of lease arrangements. Requirements of International Accounting Standards (IAS) 17 were considered including theoretical framework on the various dimensions of leasing. From archival data, preference is given to operating leases as an off-statement of financial position financing. It also possesses few bottlenecks than finance leases in terms of compliance with accounting requirements. Consequently, it is essential to take cognisance of the complexities inherent in the respective lease options before deciding on which one to undertake. Moreover, the need to be computer literate as a result of growing trends in information and communication technology (ICT) is vital because most leasing arrangements presently, are perfected using sophisticated software. Keywords: Finance lease, operating lease, International Accounting Standards, information and communication technology (ICT). I. Introduction Leasing has for centuries been recognised as an important source of finance. It is a strategy for acquiring resources (in the form of machinery and equipment) for economic transformation of business enterprises. The consumers cut across various industrial sectors comprising financial institutions, oil and gas, manufacturing, aviation, energy and telecommunications. The conventional rationale for leasing is to reduce the risk of utilizing an asset by not actually owning it, thus giving the firm greater borrowing capacity (Fubara, 2004: 112). Globally, leasing has been recognized as an efficient financing method that can be utilized to facilitate capital formation process as more of the world’s equipment needs are met through this unique form of financing. In Africa, Nigeria remains a leading player in the leasing industry with N671 billion assets (Lawanson, 2014). Also David – Ikpe (2007: 22) while commending the Central Bank of Nigeria (CBN) governor for formulating the financial system strategy (FSS) 2020 which was designed to make Nigeria the financial hub of Africa by the year 2020 said:- I want to mention here, particularly that in other parts of the world, for example in the United States, equipment acquisition through leasing consists about 30% and that is a significant number. Leasing was a critical source of finance and if adopted would help grow the nation’s economy. It helps you to acquire an asset. These are the issues we have made very clear and we have said that if you take critical assessments at them, then Nigeria will become the financial hub of Africa by 2020. In the USA, leasing provides more finance than the corporate bond and commercial mortgage markets put together. This is applicable in Western Europe where leasing has grown at a faster rate than any other forms of finance in the past 25 years (Gao, 1995: 32). Globally, the industry accounts for an annual turnover of about $750 billion and constitutes the largest external source of finance (Lawanson, 2014). Scholars have documented studies on leasing in the past. Agundu and Mba (2005: 1-7) did a work on leasing business in Nigeria: operational issues and challenges. The study focused on the critical convictions and competitive factors of leading corporate concerns so as to spur others to keep going and growing through strategic change. It was found that modern investment appraisal methods were applicable and indeed imperative in lease financing decisions, if the meaningful rental economies that have been the feat of compliant firms are to be contracted by their counterparts. Robinson (1999: 177 – 182) examined commercial lease terms and the property cycle and found that the profitability of business units can be severely affected if the lease fundamentals, particularly the rent review mechanism are misunderstood. Similarly, Metawa (1995: 6-17) while examining the evaluation of lease investment opportunities: a decision support methodology recommended the use of a decision-support methodology (a computer-based system devised to solve both structured and ill-structured problems, operations research and management science) by lessors as they conduct their lease investment evaluations in an environment characterized by strong competition, incomplete information and rapid technological advances rather than the traditional internal rate of return (IRR) and net present value (NPV) criteria.