Gallagher v. Jones, [1993] BTC 310 (CA)

In finding that two leasing companies were not entitled to deduct the full amount of large initial lease payments made pursuant to leasing agreements which constituted finance leases for accounting purposes, but instead were only permitted to deduct the expenditures over the projected life of the leases in accordance with the matching principle, Bingham M.R. stated (pp. 328-329):

"Subject to any express or implied statutory rule, of which there is none here, the ordinary way to ascertain the profits or losses of a business is to apply accepted principles of commercial accountancy ... . I find it hard to understand how any judge-made rule could override the application of a generally accepted rule of commercial accountancy which (1) applied to the situation in question, (2) was not one of two or more rules applicable to the situation in question and (3) was not shown to be inconsistent with the true facts ..."

In finding that two leasing companies were required to amortize large initial lease payments made by them over the terms of the leases in accordance with generally accepted accounting principles rather than deducting such payments in full when incurred, Bingham M.R. stated (pp. 328-329)

"Subject to any express or implied statutory rule, of which there is none here, the ordinary way to ascertain the profits or losses of a business is to apply accepted principles of a commercial accountancy .. .. As has often been pointed out, such principles are not static: they may be modified, refined and elaborated over time as circumstances change and accounting insights sharpen. But so long as such principles remain current and generally accepted they provide the surest answer to the question which the legislation requires to be answered ... . Different considerations arise where there is no accounting evidence or where there are two or more principles either or any of which is generally accepted."