Operating Lease

For financial accounting purposes a lease which does not meet the criteria of a finance lease as defined by the accounting practice SSAP21. The risk and rewards of ownership lie with the lessor. The lessee cannot be liable for any residual risk on the assets. An operating lease is accounted for by the lessee without showing an asset for the equipment or a liability for the lease payment obligations on its balance sheet. Periodic payments are accounted for by the lessee as operating expenses for the period of the agreement.