Lease Accounting

Lease accounting is the process of recording and reporting lease agreements between a lessee (tenant) and lessor (owner). It involves recognizing the leased asset and liability on the lessee’s balance sheet for leases longer than a year, reflecting the economic commitment. This approach improves transparency, showing the company's assets and obligations more accurately. For shorter-term leases, expenses are typically recognized gradually. Overall, lease accounting ensures financial statements accurately depict the company’s lease commitments and assets, aligning with accounting standards to provide clear financial information to stakeholders.