// definition
Finance lease (US GAAP)
Lessee accounting for a finance lease
Short definition
A lessee lease category under US accounting rules, assessed using criteria such as ownership transfer, purchase options, the lease term and payment value. A right-of-use asset and liability are recognised at commencement. Costs include amortisation and interest. Principal repayments are financing cash flows; interest paid is generally an operating cash flow. An issuer’s stated capital-expenditure measure depends on its own definition.
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Knowledge map
Intuition
Lease classification shapes the presentation of expenses and payments.
Related analyses
- Microsoft: AI reporting, capex and cash flowLeases, cash investment and accounting measures with their boundaries made explicit.
Primary sources
- FASB, ASU 2016-02, Topic 842, Section AClassification criteria; lessee recognition and costs; ASC 842-20-45-5 cash-flow presentation, including certain costs capitalised in another asset. The Codification is authoritative.
- Microsoft / SEC, FY2026 Form 10-K, Note 13, LeasesRight-of-use assets, liabilities and lease payments classified as operating or financing cash flows.
- Microsoft, July 29, 2026 earnings callManagement’s capex definition includes finance leases and excludes operating leases; expected impact on future datacenter contracts.