What does an operating lease indicate about the ownership of the asset?

An operating lease indicates that the lessor retains ownership of the asset. In this financing arrangement, the lessee obtains the right to use the asset for a specified period while the lessor maintains ownership. This is a key distinction of operating leases compared to finance leases, where the lessee may eventually own the asset.

Since the lessee does not own the asset, they are not entitled to claim depreciation on it, which supports the notion that the lessor continues to bear the risks and rewards associated with ownership. Additionally, in operating leases, the asset is not typically recorded on the lessee's balance sheet; instead, lease payments are usually classified as operating expenses. This is significant in understanding how different leasing arrangements can impact financial statements and the overall financial position of a company.