REGISTERED NUMBER: 04339991 (England and Wales)

STRATEGIC REPORT, REPORT OF THE DIRECTORS AND

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 APRIL 2025

FOR

WEST BUILDING SUPPLIES LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

4

Report of the Independent Auditors

6

Statement of Comprehensive Income

10

Balance Sheet

11

Statement of Changes in Equity

12

Cash Flow Statement

13

Notes to the Cash Flow Statement

14

Notes to the Financial Statements

16

DIRECTORS:

R S Price

O H West

N Lander

SECRETARY:

C West

REGISTERED OFFICE:

Medina House

2 Station Avenue

Bridlington

East Yorkshire

YO16 4LZ

REGISTERED NUMBER:

04339991 (England and Wales)

AUDITORS:

Lloyd Dowson Audit Limited

Chartered Accountants

& Statutory Auditors

Medina House

2 Station Avenue

Bridlington

East Yorkshire

YO16 4LZ

The directors present their strategic report for the year ended 30 April 2025.

During the previous year, the financial year end of the company was changed from 31 March to 30 April. Accordingly, the previous financial statements were prepared for the 13 months from 1 April 2023 to 30 April 2024 and as a result the comparative figures stated in the income statement and related notes are not comparable.

REVIEW OF BUSINESS

The company derives its turnover and profits from the sale of building supplies.

During the year, the directors have extended operations by opening two further branches in Hull and Scunthorpe.

The key financial highlights are as follows:

30.04.25

30.04.24

31.03.23

31.03.22

Turnover

£10,363,572

£10,078,466

£10,421,019

£10,844,843

Gross profit %

33.68%

35.28%

30.92%

37.36%

Profit before tax excl group dividend

£312,890

£270,042

£167,381

£1,015,512

Turnover has increased in the year by 2.8% from the previous 13 month period (2024 decrease : 3.3%).

The directors are pleased with the performance in the year under review.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risk and uncertainty facing the company is the impact of macroeconomic volatility which can impact customer demand and the availability of supply of products.

The company's future is linked with continued growth in the construction industry and the directors feel that the nature of the business will sustain in demand. The company is also linked to the prosperity of tourism and the investment within this industry, in the local areas where the company operates its branches.

In order to continue to adapt and grow, the company continues to ensure that it has a wide range of building supplies available to its customers and to invest in new plant and equipment, to maintain its existing assets, as well as maintaining good relationships with customers and suppliers to ensure trading continues to prosper.

FINANCIAL INSTRUMENTS

The company's principal financial instruments comprise bank balances, bank loans and hire purchase liabilities, trade creditors and trade debtors. The main purpose of these financial instruments is to raise funds to finance the company's operations.

Due to the nature of the financial instruments used by the company, there is minimal exposure to currency risk. The company's approach to managing other risks applicable to the financial instruments is detailed below.

Trade debtors are managed through credit and cash flow risk by assessing the credit offered to customers and the regular monitoring of amounts outstanding at a given time.

Trade creditors liquidity risk is managed by ensuring sufficient funds are available to meet liabilities as they fall due.

The company's bank accounts are monitored to ensure the company has sufficient funds to meet their current commitments, making use of invoice financing of trade debtors, overdraft and loan facilities, where appropriate.

Hire purchase and bank loans are used to fund the acquisition of fixed assets.

ON BEHALF OF THE BOARD:

N Lander - Director

8 January 2026

The directors present their report with the financial statements of the company for the year ended 30 April 2025.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of a builders merchants.

DIVIDENDS

The total distribution of dividends for the year ended 30 April 2025 will be £ 84,777 .

FUTURE DEVELOPMENTS

Whilst always closely monitoring the company's local markets and the wider economic circumstances, the directors are confident that the company will be able to trade profitably for the foreseeable future. Given the financial strength of the company which has accumulated through careful management of the company's reserves, the directors are confident that the company would be able to adapt to and withstand the impacts of any economic downturn.

DIRECTORS

The directors shown below have held office during the whole of the period from 1 May 2024 to the date of this report.

R S Price

O H West

Other changes in directors holding office are as follows:

C West - resigned 2 August 2024

J A West - resigned 2 August 2024

N Lander - appointed 2 August 2024

DISCLOSURE IN THE STRATEGIC REPORT

In accordance with Section 414C (11) of the Companies Act 2006, the company has chosen to report details concerning financial instruments within the strategic report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

ON BEHALF OF THE BOARD:

N Lander - Director

8 January 2026

Opinion

We have audited the financial statements of West Building Supplies Limited (the 'company') for the year ended 30 April 2025 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 30 April 2025 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page four, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

The extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements, to perform audit procedures to help identify instances of non-compliance with other laws and regulations that may have a material effect on the financial statements, and to respond appropriately to identified or suspected non-compliance with laws and regulations identified during the audit.

In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified during the audit.

However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the entity's operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection of fraud.

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the audit engagement team:

-

obtained an understanding of the nature of the industry and sector, including the legal and regulatory frameworks that the company operates in, including whether the company is complying with those legal and regulatory frameworks;

-

inquired of management, and those charged with governance, about their own identification and assessment of the risks of irregularities, including any known actual, suspected or alleged instances of fraud;

-

discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of how and where the financial statements may be susceptible to fraud.

As a result of these procedures we consider the most significant laws and regulations that have a direct impact on the financial statements are FRS 102, the Companies Act 2006 and tax compliance regulations. We performed audit procedures to detect non-compliance which may have a material impact on the financial statements which included reviewing financial statement disclosures, inspecting correspondence with relevant tax authorities and evaluating advice received from third party advisors.

The most significant laws and regulations that have an indirect impact on the financial statements are those in relation to health and safety, data protection and employment laws. We performed audit procedures to inquire of management whether the company is in compliance with these laws. This work included evaluating correspondence with third party consultants.

The audit engagement team identified the risk of management override of controls and the risk of fraud in revenue recognition as the areas where the financial statements were most susceptible to material misstatement due to fraud. Audit procedures performed included but were not limited to;

-

testing material journal entries throughout the year and evaluating their business rationale;

-

reviewing key controls and account reconciliations;

-

testing material bank transactions for business rationale;

-

on a sample basis, reviewing authorisation procedures of business expenditure, including review of supporting documentation.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Tracy Meredith-Baker, FCA FCCA (Senior Statutory Auditor)

for and on behalf of Lloyd Dowson Audit Limited

Chartered Accountants

& Statutory Auditors

Medina House

2 Station Avenue

Bridlington

East Yorkshire

YO16 4LZ

8 January 2026

TURNOVER

10,363,572

10,078,466

Cost of sales

6,873,296

6,523,040

GROSS PROFIT

3,490,276

3,555,426

Administrative expenses

3,224,888

3,290,907

265,388

264,519

Other operating income

3

77,963

34,585

OPERATING PROFIT

5

343,351

299,104

Income from shares in group undertakings

11,000

-

Income from fixed asset investments

-

17,402

Interest receivable and similar income

5,883

539

16,883

17,941

360,234

317,045

Interest payable and similar expenses

6

36,344

47,003

PROFIT BEFORE TAXATION

323,890

270,042

Tax on profit

7

89,782

73,675

PROFIT FOR THE FINANCIAL YEAR

234,108

196,367

OTHER COMPREHENSIVE INCOME

Revaluation of property

-

659,811

Redemption premium on preference shares

-

(3,750

)

Income tax relating to components of other comprehensive income

-

(122,823

)

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

-

533,238

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

234,108

729,605

FIXED ASSETS

Intangible assets

9

-

-

Tangible assets

10

3,690,512

3,511,029

Investments

11

100,000

100,000

3,790,512

3,611,029

CURRENT ASSETS

Stocks

12

2,509,630

2,013,873

Debtors

13

1,792,712

1,334,858

Cash at bank and in hand

296,693

559,025

4,599,035

3,907,756

CREDITORS

Amounts falling due within one year

14

3,169,819

2,407,626

NET CURRENT ASSETS

1,429,216

1,500,130

TOTAL ASSETS LESS CURRENT LIABILITIES

5,219,728

5,111,159

CREDITORS

Amounts falling due after more than one year

15

(749,443

)

(839,055

)

PROVISIONS FOR LIABILITIES

19

(555,960

)

(507,110

)

NET ASSETS

3,914,325

3,764,994

CAPITAL AND RESERVES

Called up share capital

20

155,000

155,000

Capital redemption reserve

21

25,000

25,000

Non distributable reserve

21

1,341,117

1,356,792

Retained earnings

21

2,393,208

2,228,202

SHAREHOLDERS' FUNDS

3,914,325

3,764,994

The financial statements were approved by the Board of Directors and authorised for issue on 8 January 2026 and were signed on its behalf by:

N Lander - Director

Called up

Capital

Non

share

Retained

redemption

distributable

Total

capital

earnings

reserve

reserve

equity

£

£

£

£

£

Balance at 1 April 2023

180,000

2,296,364

-

843,646

3,320,010

Changes in equity

Total comprehensive income

-

191,459

25,000

513,146

729,605

Dividends

-

(259,621

)

-

-

(259,621

)

Redemption of preference shares

(25,000

)

-

-

-

(25,000

)

Balance at 30 April 2024

155,000

2,228,202

25,000

1,356,792

3,764,994

Changes in equity

Total comprehensive income

-

249,783

-

(15,675

)

234,108

Dividends

-

(84,777

)

-

-

(84,777

)

Balance at 30 April 2025

155,000

2,393,208

25,000

1,341,117

3,914,325

Cash flows from operating activities

Cash generated from operations

1

368,749

573,416

Interest paid

(33,861

)

(44,277

)

Interest element of hire purchase payments paid

(2,973

)

(2,611

)

Tax paid

(140,477

)

(53,504

)

Net cash from operating activities

191,438

473,024

Cash flows from investing activities

Purchase of tangible fixed assets

(298,483

)

(23,582

)

Purchase of fixed asset investments

-

(50,000

)

Sale of tangible fixed assets

-

22,708

Loan with former group member

22,817

318,951

Interest received

5,883

539

Dividends received

-

17,402

Net cash from investing activities

(269,783

)

286,018

Cash flows from financing activities

Loan repayments in year

(122,737

)

(130,449

)

Movement in factoring loan

42,371

(168,299

)

Hire purchase capital repayments in year

(14,394

)

(20,296

)

Introduced/(withdrawn) by directors

(4,450

)

3,596

Redemption of preference shares

-

(28,750

)

Equity dividends paid

(84,777

)

(259,621

)

Net cash from financing activities

(183,987

)

(603,819

)

(Decrease)/increase in cash and cash equivalents

(262,332

)

155,223

Cash and cash equivalents at beginning of year

2

559,025

403,802

Cash and cash equivalents at end of year

2

296,693

559,025

1.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

Period

1.4.23

Year ended

to

30.4.25

30.4.24

£

£

Profit before taxation

323,890

270,042

Depreciation charges

98,531

131,696

Profit on disposal of fixed assets

-

(9,530

)

Finance costs

36,344

47,003

Finance income

(16,883

)

(17,941

)

441,882

421,270

Increase in stocks

(495,757

)

(81,715

)

(Increase)/decrease in trade and other debtors

(296,937

)

217,272

Increase in trade and other creditors

719,561

16,589

Cash generated from operations

368,749

573,416

2.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 30 April 2025

30.4.25

1.5.24

£

£

Cash and cash equivalents

296,693

559,025

Period ended 30 April 2024

30.4.24

1.4.23

£

£

Cash and cash equivalents

559,025

403,802

3.	ANALYSIS OF CHANGES IN NET DEBT

Other

non-cash

At 1.5.24

Cash flow

changes

At 30.4.25

£

£

£

£

Net cash

Cash at bank

and in hand

559,025

(262,332

)

296,693

559,025

(262,332

)

296,693

Debt

Finance leases

(54,899

)

14,394

(57,985

)

(98,490

)

Debts falling due

within 1 year

(130,000

)

7,350

-

(122,650

)

Debts falling due

after 1 year

(789,499

)

115,387

-

(674,112

)

(974,398

)

137,131

(57,985

)

(895,252

)

Total

(415,373

)

(125,201

)

(57,985

)

(598,559

)

1.	STATUTORY INFORMATION

West Building Supplies Limited is a private company, limited by shares , registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006. The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets.

Significant judgements and estimates

In the application of the company's accounting policies, which are described further in this note, management are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation and uncertainty

The key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are described below.

Useful economic lives of intangible and tangible assets

The annual amortisation and depreciation charges for intangible and tangible assets are sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re-assessed annually. They are amended when necessary to reflect current estimates, based on technological advancement, future investments, economic utilisation and the physical condition of the assets. See the notes to the financial statements for the carrying amount of the intangible assets, the carrying amount of the property, plant and equipment and the useful economic lives of each class of assets.

Stock provisioning

The company stock is subject to changing industry and consumer demands. As a result, it is necessary to consider the recoverability of the cost of stocks and the associated provisioning required. When calculating the stock provision, management considers the nature, age and condition of the stock, as well as applying assumptions around anticipated saleability of stock.

Supplier rebates

The value of supplier rebates included in the income statement is generally calculated by applying an agreed percentage to the gross supplier invoice price of the goods purchased. The majority of supplier rebates are determined by reference to 'guaranteed' rates of rebate, the remainder are subject to stepped targets. Amounts receivable under most supplier agreements are earned and settled monthly or quarterly, although some agreement may also be bi-annual or annual payments which are not coterminous with the year end.

Freehold and leasehold property valuation

The directors revalue the company's freehold and leasehold property each year. The determination of the fair value of each property requires the use of estimates and assumptions in relation to factors such as supply and demand in the local area, general condition and age of the property and market yields.

Turnover

Turnover is recognised at the fair value of the consideration received or receivable for sale of goods in the ordinary nature of the business and is recognised net of trade discounts and value added taxes. Income is recognised when the customer is in receipt of the relevant goods or services and when the risk and rewards of ownership has transferred.

Goodwill

Goodwill, being the amount paid in connection with the acquisition of the trading of West & Heaton and West & Heaton Timber Limited in 2002, has been fully written off evenly over its estimated useful life of twenty years.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.

Freehold property

-

1% on valuation

Short leasehold

-

over the lease term

Long leasehold

-

1% on valuation

Fixtures and fittings

-

15% on reducing balance

Motor vehicles

-

25% on reducing balance

Computer equipment

-

25% on reducing balance

Stocks

Stocks are stated at the lower of cost and net realisable value. Cost is based on weighted average price and includes all expenditure incurred in acquiring the inventories and bringing them to their present location and condition. Net realisable value is the estimated proceeds of sale less all further costs to completion after making due allowance for obsolete and slow moving items.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Hire purchase and leasing commitments

Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.

The interest element of these obligations is charged to the statement of income over the relevant period. The capital element of the future payments is treated as a liability.

Rentals paid under operating leases are charged to the statement of income over the period to which they relate.