Lease Liability

Lease liability is the financial obligation a company has to make payments for renting property or equipment over the lease term. When a business enters into a lease agreement, it recognizes the total amount it expects to pay as a liability on its balance sheet, reflecting the future payment obligations. This liability is recorded at the present value of all future lease payments, accounting for interest and other factors. Essentially, it represents the company's commitment to pay for the leased asset over time, similar to a debt, and is offset by the right to use the asset during the lease period.