Lessors classify leases as sales-type leases, direct financing leases or operating leases. In sale-type and direct financing leases, lessors de-recognize the underlying asset, recognize any profit or loss on the asset and establish an investment in the lease. Over the duration of a sales-type lease, the lessor records interest income and reduces the balance of the lease investment as they receive cash payments. The lessor accounting for a direct financing lease, which is less like an outright sale, defers any profit/loss on the asset. And for operating leases, which are the least sales-like, lessors retain the asset and related depreciation on their books and simply record interest income.