Operating lease
In accounting, operating lease means under ASC 842, a lessee lease that is not a finance lease — on the balance sheet, with a single straight-line lease cost in the P&L.
- Layer
- Lexicon
- Defined in
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- 4
Authority
This definition follows ASC 842-20-25-6.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- off-balance-sheet lease (no longer, since ASC 842)
Nearby in the catalog
No component names this concept outright. These are the ones in its part of the system, which is a weaker claim — but a component nothing links to is a component nobody finds.
Terms this one depends on
- Balance sheetAssets, liabilities and equity at a point in time, proving the accounting equation
- Finance leaseA lease that effectively transfers control of the asset — ownership transfer, purchase option reasonably certain, major part of life or substantially all of fair value, or a specialized asset — expensed as amortization plus interest
Also in Fixed assets & leases
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- Operating lease vs finance leaseBoth put a right-of-use asset and a lease liability on the balance sheet under ASC 842; an operating lease shows one straight-line lease cost in the P&L, while a finance lease shows interest and amortization separately, front-loading the expense.Compare
- Journal entry for an operating lease under ASC 842At commencement, debit Right-of-use asset and credit Lease liability for the present value of the payments. Each payment debits Lease liability and credits Cash; each month-end debits Operating lease cost for the straight-line cost and credits Lease liability for the interest and the right-of-use asset for the rest.Entry
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.