Lessee Accounting Model

The Lessee Accounting Model refers to how a company records leases on its financial statements. When a company leases an asset, like equipment or a building, it now recognizes a "right-of-use" asset (the right to use the asset) and a lease liability (the obligation to make lease payments). Over the lease term, it expenses the asset’s depreciation and interest on the liability. This approach provides a clearer picture of the company's true financial obligations, ensuring transparency and comparability by reflecting lease commitments as both assets and liabilities on the balance sheet.