Capital Lease

A capital lease is a type of lease where the lessee (tenant) essentially takes on the risks and benefits of ownership of an asset, like equipment or property. This means the asset is recorded on the lessee's balance sheet as an asset, and a liability is created for future lease payments. The lease is considered similar to purchasing the asset with a loan. Typically, this occurs if the lease term covers most of the asset's useful life, or if ownership transfers at the end. It reflects a long-term commitment, giving a more accurate view of the company's assets and financial obligations.