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Lease Accounting

What is "Lease Accounting"?

Lease Accounting refers to the method businesses use to account for leased assets—such as vehicles, equipment, or office spaces—on their financial statements. In corporate travel, lease accounting plays a vital role when companies lease fleet vehicles, long-term accommodations, or travel-related equipment to support employee mobility.

 

With standards like IFRS 16 and ASC 842, companies must now recognize most leases on the balance sheet. This includes recording the leased asset and its corresponding liability, which affects financial metrics such as debt ratios and asset valuations. Proper lease accounting ensures compliance with regulatory requirements and provides stakeholders with a clearer picture of a company’s financial obligations.

 

In the travel and expense domain, lease accounting is particularly relevant for businesses with recurring vehicle rentals for executives, long-term corporate apartment leases, or agreements with travel vendors offering lease-like payment models. Accurate lease reporting also enables better cost management and audit readiness.

Examples Of Lease Accounting In Corporate Travel And Expense
1.
Leased Corporate Vehicles
A Company Leases Cars For Regional Sales Teams. The Leases Are Recorded As Assets And Liabilities Under Lease Accounting Rules.
2.
Long-Term Business Lodging
An Organization Rents Serviced Apartments For Executives On Extended Projects, And These Are Treated As Leases In Financial Reports.
3.
Airport Lounge Agreements
A Business Signs A Lease-Style Contract With An Airline For Lounge Access Across Multiple Airports, Triggering Lease Recognition Under Accounting Standards.
Frequently Asked Questions About Lease Accounting
1.
Why is lease accounting important in corporate travel?
It ensures companies properly report travel-related leases like cars or long-term accommodations, improving financial transparency and compliance.
2.
What standards govern lease accounting?
IFRS 16 (International) and ASC 842 (US GAAP) require most leases to be reported on the balance sheet, replacing previous off-balance-sheet treatments.
3.
How does lease accounting impact travel budgets?
By recognizing lease costs upfront, businesses gain better visibility into long-term travel-related expenses and liabilities.
4.
Is lease accounting required for short-term rentals?
Generally, leases shorter than 12 months can be exempt under accounting standards, but companies should assess this based on contract terms.
5.
How can TripGain help with lease-related travel expenses?
TripGain’s expense management system helps categorize and track lease-related travel costs, simplifying reporting and supporting audit-ready financial documentation.