What financial instrument does a "true" (operating) lease pertain to when assessing costs?

A "true" (operating) lease is specifically associated with lease payments when assessing costs. In accounting terms, operating leases are generally recognized as rental agreements where the lessee (the party using the asset) makes periodic lease payments to the lessor (the party owning the asset) for the use of the asset without taking on the associated risks and rewards of ownership.

These lease payments are recorded as an expense on the income statement throughout the lease term, affecting cash flow but not capitalizing the leased asset on the balance sheet as a long-term asset. This treatment distinguishes operating leases from capital leases, where the asset is recorded as an owned asset and depreciated over its useful life. By focusing on lease payments, businesses can better manage their ongoing costs and evaluate the impact on their financial performance.

This emphasis on cash outflows rather than the balance sheet items of debt, equity, or assets aligns with the nature of operating leases, where the financial obligation primarily reflects the future lease payment commitments rather than an ownership stake or a funded capital structure.