What is the effect of using an operating lease on the balance sheet of a company?

Using an operating lease traditionally does not affect the balance sheet significantly because, under the previous accounting standards (prior to ASC 842 in the U.S.), operating leases were not required to be recorded as liabilities or assets on the balance sheet. Instead, companies would report lease payments as expenses on the income statement. This means that when a company enters into an operating lease, it typically does not record the lease commitment as a liability, and therefore, there is no corresponding increase in assets from leased equipment or properties.

However, it is important to note that under the new lease accounting standards established by ASC 842, most leases will now require the recognition of a right-of-use asset and a lease liability on the balance sheet, which changes how operating leases are reflected. But if the context of the question refers to the previous accounting treatment, the effect would indeed be minimal on the balance sheet, justifying the choice that it does not affect the balance sheet significantly.