This video shows how the accounting for a lease would be different if the lessee used a finance lease vs. an operating lease under the new lease rule. With either classification, the lessee would initially recognize a right-of-use asset and a liability for the lease payments. Each time a lease payment is made, the lease liability would decrease. The expenses recognized each period, however, are different depending on whether the lease is a finance lease or an operating lease. With a finance lease, the lessee will separately recognize interest expense and amortization expense each period, and the total of these two expenses will be higher in the early years of the lease and lower in the later years of the lease. With an operating lease, in contrast, the lessee just recognizes one expense account called lease expense each period for the amount of the lease payment. The lease expense is the same amount each period, and it accounts for both interest accrued on the lease liability and amortization.