This decision is primarily influenced by whether a lease is classified as an operating lease or a finance or capital lease, and the applicable accounting framework. Accounting standards for leases have recently undergone significant changes. The new standard for leases, Accounting Standards Codification (ASC) 842, became effective for reporting periods beginning on or after December 15, 2018. These new standards require most leases, including operating leases, to be capitalized on the balance sheet.
Under ASC 842, the distinction between operating and finance leases is largely eliminated for lessees. Lessees are required to recognize both operating and finance leases on the balance sheet with the leased asset and corresponding lease liability being recorded. This change aims to provide a more transparent representation of a company's lease obligations and assets.