Definition: Leases

Category: National accounts

Government is the user, during a given period, of an asset that is legally owned by a nongovernment unit. According to the “risks and rewards” borne by each party (that is the basis of the concept of “economic ownership”), the lease is considered either as an “operating lease” or as a �financial lease”, which gives rise to different treatments in national accounts,
fully specified in ESA95 (Annex II). This concerns also cases of “Cross border leases” (which take the form of a set of interlinked lease agreements commonly referred to as “head” and “sub” leases). If government enters in a financial lease agreement, its deficit and debt would be impacted for the full value of the assets at the time government takes possession of the
assets. http://ec.europa.eu/eurostat/ramon/statmanuals/files/KS-BE-04-004-EN.pdf