When a lease is classified as an operating lease, the lease expenses are treated as operating expense and the operating lease does not show up as part of the capital of the firm. The present value of the lease expenses is treated as debt, and interest is imputed on this amount and shown as part of the income statement.
Under FASB ASC 842 and IASB IFRS 16 guidance, both operating and finance leases must report amortization on a right-of-use asset. Finance lease must also report an interest expense.
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