Capitalized Lease

In accounting, when a company is delaying the recorded expense of a lease, the expense is considered capitalized. That is, the recognition of that lease's decay in value is extended over some given period of time.

However, the lease is also recorded simultaneously as an asset. Wait...What? How can this be?

The capitalized lease is seen as an asset because it recognizes the depreciation expense while incurring the interest expense of the lease. Ummm…Okay. Here's an example: As a new accountant for Orange You Rich Co., you lease multiple "work" phones for your team (because who has that kinda money to drop on the latest version of the iPhone) and immediately you record the expense as an asset, because as soon as you turn on the phone your new lease has already depreciated. Why? Because Apple has just unveiled its latest and greatest version of their smartphone...and this time with even more features you'll never learn how to use.

Lucky for you, the lease ends up being less than the depreciated value, which is good for your books, but not so good for keeping up with the Joneses.