Previous lessee accounting IAS 17 focused on identifying when a lease is economically similar to purchasing the asset being leased (the ‘underlying asset’). When a lease was determined to be economically similar to purchasing the underlying asset, the lease was classified as a finance lease and reported on a company’s balance sheet. All other leases were classified as operating leases and not reported on a company’s balance sheet (they were ‘off balance sheet leases’). Off balance sheet leases were accounted for similarly to service contracts, with the company reporting a rental expense in the income statement (typically the same amount in each period of the lease—a so called straightline lease expense).