Leasing

Leasing is a contractual arrangement in which a party called the lessor provides an asset for use to another party, the lessee, for a defined period in exchange for periodic payments. Ownership of the asset remains with the lessor, while the lessee gains the right to use the asset under specified terms and conditions.

Leases are commonly classified as finance leases and operating leases. A finance lease generally transfers substantially all the risks and rewards of ownership to the lessee, who may have the option to purchase the asset at the end of the term. An operating lease typically does not transfer those risks and may be shorter than the asset’s economic life, with payments recognized as an expense. Other arrangements include sale and leaseback, where an entity sells an asset and immediately leases it back, and leveraged leases, which involve third-party financing.

In accounting and reporting, leases affect the recognition of assets, liabilities, and income. Modern standards require lessees to recognize a right-of-use asset and a lease liability for most leases, with payments allocated to interest and principal and, for operating leases, to expense. Lessor accounting generally excludes the asset from depreciation by the lessee and recognizes lease income over the term. Tax treatment and regulatory rules vary by jurisdiction.

Leasing is widely used for equipment, vehicles, and real estate, enabling entities to access assets without large upfront capital, manage obsolescence, and align payments with operating needs. It also supports lenders and asset owners in monetizing idle capacity and transferring risk under agreed terms.