Finance Lease (U.S. GAAP)

From the standpoint of the lessee, a finance lease is a lease that transfers substantially all of the benefits and risks inherent in ownership of property to the lessee. A finance lease is in substance an installment purchase in the form of a lease. Both a right-of-use (ROU) asset and a liability are recorded. See also operating lease and direct financing lease and sales-type lease and finance lease criteria.