Liabilities Against Assets Subject To Finance Lease

Lease Financing essentially involves the divorce of ownership from the economical use of the asset for the lessor i.e. The Lessor is the owner of the capital asset and the ownership of the asset always remains with him, but the right to use the asset is transferred to the lessee.

The lessor retains ownership of the asset, but the lessee gets exclusive use of the asset (subject to meeting the terms of the lease). … Using a finance lease means that the asset will appear on the lessee’s balance sheet, with outstanding rentals represented as a liability.