What Is an Operating Lease?

An operating lease is a contract that allows for the use of an asset but does not convey ownership rights of the asset.

KEY POINTS

  • An operating lease is a contract that permits the use of an asset without transferring the ownership rights of said asset.
  • GAAP rules govern accounting for operating leases.
  • A new FASB rule, effective Dec. 15, 2018, requires that all leases 12 months and longer must be recognized on the balance sheet.