What are the implications of an operating lease versus a capital lease on an entity’s financial statements?
Implications associated with operating leases versus capital leases on the entity’s financial statement are as follows: an operating lease recognizes the cost of the lease with each payment made, whereas a capitalized lease provides for several different methods of allocating the cost of a lease over its useful life. For instance, a capitalized leased is basically a purchased asset that could be depreciated on the straight-line method or the declining-balance method.
