What is Operating lease (lessor)?
In short
In an operating lease, the lessor keeps the leased asset on its balance sheet and keeps depreciating it, and recognizes lease income on a straight-line basis over the lease term.
Key takeaways
- Initial direct costs are deferred and expensed over the lease term.
- Variable payments are recognized as income when earned.
- It applies when none of the sales-type criteria are met and the lease isn't a direct financing lease.
Where it's tested
BAR: Lease Accounting — Lessor Perspective — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
In a lessor's operating lease, the underlying asset is: