Obtainable Borrowing Rate calculator for FRS 102 leases
Enter the lease and the company. Get a documented obtainable borrowing rate with the reasoning behind it, plus the lease liability, amortisation and depreciation schedules, journal templates and a disclosure note. Minutes rather than weeks, from £49 a calculation.
One free preview, no card · PDF and CSV · Methodology published in full · See a sample report
Where the discount rate gets difficult
Section 20 sets out the order to work in. The difficulty is not knowing the rule; it is evidencing the answer.
The implicit rate is rarely available
Section 20 asks first for the interest rate implicit in the lease. Determining it needs the lessor's costs and residual value assumptions, which a lessee is not usually given. For most SME leases the question moves on to the next step.
Then the choice is yours: IBR or OBR
Where the implicit rate cannot be readily determined, FRS 102 lets the lessee choose, lease by lease, between its incremental borrowing rate and its obtainable borrowing rate (para 20.49). Neither is mandatory. The choice is a judgement, and it is disclosable.
The OBR is usually easier to evidence
The OBR is the rate you could borrow at, over a similar term and with similar security, an amount equal to the total undiscounted lease payments: a figure already stated in the lease. The IBR is measured against the value of a similar asset, which is one more thing to establish and support.
Either way, the rate needs a file behind it
Banks rarely issue formal rate letters for facilities that do not exist, and an advertised headline rate reflects no particular borrower. Whichever route you take, a reviewer needs to see the method, the inputs and the assumptions.
The rate is only the first number
The liability, the right-of-use asset, the monthly unwind, the depreciation charge, the journals and the disclosure note all follow from it. A rate on its own does not close the file.
It does not scale by hand
A bespoke study is the right answer for a complex or material lease, at £500 to £2,000 and two to four weeks. It is not a practical way to handle a portfolio of routine leases before a year end.
What Lease Rater produces
An obtainable borrowing rate built for one entity and one lease, and the FRS 102 measurement that follows from it, in a form you can put straight into the file.
A rate specific to the entity
Built from the SONIA term structure plus a credit spread reflecting this company's financial profile, sector, size, lease term, security and exposure. Not an advertised rate applied to everyone.
The measurement, not just the rate
Every paid report carries the lease liability present value, the monthly amortisation and right-of-use depreciation schedules, balance sheet and profit and loss impact summaries, journal entry templates for day one recognition, monthly payment and depreciation, and a disclosure note template. All exportable to CSV for your working papers.
A methodology you can read
The report sets out how the rate was built: base rate, then four weighted pillars covering financial health, security and structure, sector and size, and exposure. Every band threshold and assumption is stated. Nothing is withheld as proprietary.
Consistency across a portfolio
The same method applied to every lease, entity and period, so differences between rates trace to the inputs rather than to who ran the calculation and when.
A stated basis for judgement
Section 20 leaves the discount rate to management's judgement. The report documents the basis on which that judgement was reached, so it can be reviewed rather than simply asserted. Whether it is accepted remains a matter between you and your auditor.
Priced per calculation
£49 for a single report, less in volume. No subscription, no retainer, no minimum. Credits never expire.
For finance teams
You need a discount rate for each lease, and the numbers that follow from it.
- A year end to hit, and leases still to process
- No appetite for a multi-week consulting engagement
- A method your auditor can follow without a meeting
- The schedules and journals, not just a percentage
- A cost that fits a compliance task, not a project
For accountants and advisors
A consistent basis to apply across every FRS 102 client.
- One documented method, not a different approach per client
- Advise on the output or run it on the client's behalf
- A methodology you can review before you rely on it
- Comparable results across entities and periods
- Volume pricing for portfolio work
How it works
Enter the lease and the entity
Lease term, payments and asset; company sector, size and security; the latest financials. Each field carries guidance on what it is for and where to find it.
Review the rate and its drivers
A headline rate with a defensible range, and the contribution each pillar made to the spread. Check it before you commit a credit.
Take the report to the file
A PDF setting out the rate, methodology, assumptions and key drivers, with the present value, schedules, journal templates and disclosure note. CSV alongside it for your working papers.
You do not have to take that on trust. See a full sample report, screens and PDF, for an illustrative company.
What it costs
No subscription, no sales call, no minimum commitment.
Bespoke study
- Two to four weeks
- Specialist judgement applied case by case
- Well suited to a complex or material lease
- Hard to justify per lease across a portfolio
Lease Rater
- A finished report in minutes
- Published methodology and stated assumptions
- Lease liability, schedules and journals
- Volume packs for portfolio work
- No subscription; credits never expire
An undocumented estimate
- No method or assumptions on file
- Not specific to the entity or the lease
- Difficult to support if it is questioned
- Rework lands in the middle of the audit
Common questions
Does FRS 102 require an obtainable borrowing rate?
No. Section 20 asks first for the interest rate implicit in the lease. Where that cannot be readily determined, the lessee chooses, on a lease-by-lease basis, between its incremental borrowing rate and its obtainable borrowing rate (para 20.49). Lease Rater produces an OBR because it is generally the easier of the two to evidence, not because the standard mandates it.
Does every lease need a rate?
No. A lessee may elect not to recognise leases with a term of 12 months or less at commencement, and leases of low-value assets. Both elections are voluntary, both carry conditions, and both have to be disclosed. Where an election applies there is no liability to discount and no rate to determine.
Why not just ask the bank?
Banks rarely issue formal rate letters for facilities that have not been applied for. A relationship manager's indication is a useful sense check, but it usually arrives without a method or assumptions behind it, which is the part a reviewer asks to see.
Will my auditor accept it?
That is a judgement for your auditor, and no provider can promise it. What we can do is give you a rate anchored to an observable base rate, adjusted by entity-specific factors, with every assumption and band threshold disclosed, so the basis for management's judgement is documented rather than asserted.
Is this a generic rate calculator?
No. The rate is built from your actual financial metrics covering leverage, profitability and liquidity, alongside sector, size, security and lease term. Two companies entering the same lease will get different rates.
Do I need a separate rate for every lease?
Not necessarily. Leases with similar terms, security and commencement dates can reasonably share a rate. A two-year vehicle lease and a ten-year property lease should not, because the term and security differ materially. The choice of rate is made lease by lease.
What if the company has no borrowings?
The OBR is a hypothetical rate: what the entity could borrow at, not what it does borrow at. It is built from the credit profile and market benchmarks, so it can be determined for an entity that has never borrowed.
Do I get the accounting as well as the rate?
Yes. Every paid report includes the lease liability present value, a month-by-month amortisation and right-of-use depreciation schedule, balance sheet and profit and loss impact summaries, journal entry templates and a disclosure note template, with a CSV export. You will need to map journal codes and disclosure wording to your own chart of accounts; your accountant should review both.
Section 20 is already in force
It applies to accounting periods beginning on or after 1 January 2026, so most UK companies are in an affected period now. The discount rate is needed for transition as well as for the year itself.
Calculate a rateImportant: Lease Rater provides automated accounting-support tools for business users. Outputs are estimates based on user-supplied information, market references and standardised assumptions. They do not constitute audit assurance, legal, tax, investment or lending advice. Management remains responsible for the accounting judgements applied. See our Terms of Use and Privacy Notice.