operating lease

Related Terms
Cancelable short-term (a period shorter than the economic life of the leased asset) lease written commonly by landlords and equipment manufacturers who expect to take back the leased asset after the lease term and re-lease it to other users. The lessor gives the lessee the exclusive right to possess and use the leased asset for a specific period and under specified conditions, but retains almost all risks and rewards of the ownership. The full amount of lease payments is charged as an expense on the lessee's income statement but no associated asset or liability (other than the liability of the accrued lease payment or rent) appears on the lessee's balance sheet.
For this reason, operating leases are also called off balance-sheet financing. And, since the maintenance of the leased asset is usually the responsibility of the lessor, they are called also maintenance leases or service leases. An operating lease does not meet any of the criteria for a capital lease.

Use 'operating lease' in a Sentence

You need to know what the terms of your operating lease are so that you are not ever breaking them.
17 people found this helpful
Our company prefers an operating lease with respect to its office machinery and equipment as it limits our responsibility to the lease payment without a need to maintain or capitalize on our books.
14 people found this helpful
The rental property was issued with an operating lease which clearly defined the role of the both the renter and the landlord, it stated that the renter would occupy the space for one year upon which at the landlord's discretion the lease could be renewed or canceled.
14 people found this helpful




Email Print Embed