01 Oct Lighting as a Service Accounting Treatments
This week we wanted to look at an area which will affect certain clients who decide to move forward with a true Lighting as a Service agreement with ECI Lighting, Ireland’s oldest lighting company.
Before we outline the various methods or options of accounting for this service agreement, let’s get one thing straight. No lighting provider, whether they be a start-up or even an established player like ECI is legally permitted to offer binding accounting or auditing information or opinions as a matter of fact. The only person who matters when it comes to accounting subjectivity or the treatment of this transaction for your company is your Auditor. Once they take a position or give a written opinion on the treatment of agreements entered into then that really is all that matters.
So here are some facts about ECI’s Lighting as a Service offering.
- Your service agreement is with ECI Lighting. Not with a bank.
- It is not a loan and there is no interest payable.
- The VAT rate applicable is at the reduced rate of 13.5% as you are paying for a service, not the LED hardware.
- ECI takes the credit (and product) risk, and we are your sole point of contact at all times.
- We have a very detailed opinion (from our Auditors, one of the Top 10 firms) that our end user service agreement can be treated as an off-balance sheet transaction (we are very happy to discuss the many reasons why in greater detail), but as mentioned, it is your auditor who makes the final decision – not ours or not anyone else’s.
For more information covering a traditional CapEx lighting project (i.e. on-balance sheet) check out our recent blog post on ‘The Enigma of Energy Credits’ where the Accelerated Capital Allowance (ACA) Scheme is referenced in more detail.