## Definition of Lease

A lease is an agreement whereby the lessor (legal owner) conveys to the lessee the right to use an asset for a period of time in return for a payment or series of payments called lease rentals.

### Key Parties

Party	Role
Lessor	Legal owner who gives the right to use the asset
Lessee	Party who receives the right to use the asset

### Key Terms at a Glance

Lease Term: The agreed duration of the lease
Lease Rentals / Lease Payments / Minimum Lease Payments (MLP): The consideration paid by lessee to lessor

### Why This Matters

AS 19 governs how leases are recorded in the books of both the lessor and lessee. The entire treatment — journal entries, balance sheet presentation, income/expense recognition — depends on correctly identifying the parties and the type of lease.

⚠️ Common exam mistakes

Calling the lessee the 'owner' — the lessee only gets the RIGHT TO USE, not ownership.
Confusing Lease Payments with Minimum Lease Payments (MLP) — MLP has a specific definition that includes GRV and option payments; plain 'lease payments' does not always equal MLP.
Assuming the lessor always loses the asset from his books — this is only true in a Finance Lease, not an Operating Lease.

Bare-Act text Para 3(c) — Definition of Lease · AS 19 · click to expand

A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time.

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Definition of Lease

Worked example

⚠️ Common exam mistakes