- Herbert Spaul
- 1 week, 2 days ago
From a practical perspective, operating leases are pretty much the same as debt. They reflect a contractual obligation on the part of one counterparty to make defined stream of cash payments to another over a set period and with an implied interest rate embedded in the payment stream. In fact, within a bankruptcy context operating leases are treated exactly the same as debt and rank pari passu with the other general unsecured obligations of a business. That said, accounting rules treat operating leases differently than debt and do not require them to be included as a liability on a company's balance sheet. That is, until 2019.