A lease is a contractual agreement between a lessee and a lessor that gives the lessee the right, for a period of time, to use specific property owned by the lessor, in exchange for periodic cash payments. A lease provides a flexible source of financing for the lessee and a source of finance revenue for the lessor. Operating leases, which do not transfer risks and benefits of ownership of the leased property to the lessee, are accounted for as rentals, and result in recording of rent revenue by the lessor and recording of rent expense by the lessee. In contrast, finance leases (called “capital leases” under ASPE), which do transfer risks and benefits of ownership of the leased asset to the lessee, result in recognition of the leased asset and corresponding obligation under capital lease on the statement of financial position of the lessee. From the lessor's perspective, non-operating leases may be sales-type (called “manufacturer” or “dealer leases” under IFRS, and “sales-type leases” under ASPE) or financing-type (called “finance leases” under IFRS, and “direct financing leases” under ASPE). This chapter discusses classification of leases according to criteria as set out by IFRS and ASPE, accounting procedures under each classification from both the lessee perspective and the lessor perspective, the effect of classification of leases on financial statements, and proposed changes to accounting for leases under IFRS.