What do you understand by lease accounting?

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Lease accounting refers to the accounting treatment of lease agreements, where the lessee records the leased asset as an asset and the lease payments as liabilities.

Lease accounting involves classifying leases as either operating leases or finance leases.
For operating leases, lease payments are expensed over the lease term, while for finance leases, the leased asset is capitalized on the balance sheet.
Under the new lease accounting standard, ASC 842, lessees are required to recognize most leases on their balance sheets.
Lease accounting also includes determining the present value of lease payments and calculating the lease liability and right-of-use asset.
Lease accounting standards aim to provide a more transparent view of a company's lease obligations and financial position.

What do you understand by lease accounting?

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