Operating lease
Financial Accounting glossary · Assets: Cash, Receivables, Inventory, PP&E & Intangibles
Definition
Lease classification (ASC 842) where the lessee uses but does not control; results in a single straight-line lease expense in P&L despite balance-sheet recognition.
Operating lease in plain English
Imagine renting an apartment: you get to live in it and use it, but you don't own it, can't sell it, and can't knock down the walls. An operating lease is that same idea for a business renting equipment or space. Even though the company doesn't own the item, accounting rules (ASC 842) now make it show the deal on its books as both a 'right to use it' asset and a matching promise to pay. But on the income statement it stays simple: the company records one steady, rent-like expense that's the same amount each period, spread evenly over the life of the lease.
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