General

A security deposit needs to be paid in case of an operating lease and represents an amount of money to be used as security for proper and due performance of all lessee's obligations under the lease agreement. No invoice is issued for the security deposit. Once the agreement has expired and the lessee has performed all its obligations under the agreement, the security deposit is repaid to the lessee.

How is it accounted for?
If the lessee is subject to corporate income tax, it will disclose the security deposit paid in its balance sheet as a noncurrent receivable.
An advance rental is paid in case of an operating lease and represents a part of the lease rate paid in advance, by which the amount of financing is reduced. An invoice inclusive of VAT is issued for the advance rental.

How is it accounted for?
If the lessee is subject to corporate income tax, it accounts for the advance rental as prepaid expense over the term of the lease agreement.
A down payment is required in case of a financial lease and represents an amount of money paid by the lessee at the beginning of the lease agreement, by which the amount of financing is reduced.

How is it accounted for?
If the lessee is subject to corporate income tax, it accounts for the down payment as a reduction to the noncurrent liability for the supply of the leased asset based on the invoice issued for the leased asset supplied.
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