Operating Lease

Operating Lease

IAS 17, the accounting standard laying down the policies and disclosures applicable to leases, splits leases into finance leases and operating leases. While ownership of the leased assets under a finance lease remains with the lessor, the benefits and risks of ownership of the asset accrue to the lessee. The experience is broadly akin to the lessee owning the asset and typically having exclusive use. Finance leases call for asset and liability recognition by the lessee and a receivable by the lessor. Under an operating lease, by contrast, the benefits result in expense recognition by the lessee and the asset remains recognised by the lessor.

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