Ok - let´s have a think about this
Remember that when we say operating lease - we mean the risks and rewards are NOT taken by the lessee. So have we sold the asset or not?
Revenue recognition tells us that when the risks and rewards for goods are passed on then we have made a sale and can recognise the revenue.
So, no the lessor has NOT in substance sold the asset. Therefore the lessor keeps the asset on its SFP.
Income from an operating lease (not including services such as insurance and maintenance), should be shown straight-line in the income statement over the length of the lease (unless the item is used up on a different basis - if so use that basis).
Keep the Asset there
Operating Lease rentals received
Negotiating costs etc
Any initial direct costs incurred by lessors should be added to the carrying amount of asset on the SFP and expensed over the lease term (NOT the assets life).
Operating Lease Incentives
The lessor should reduce the rental income over the lease term, on a straight-line basis with the total of these.