Accounting for finance leases is the process of recognizing, measuring and reporting lease transactions in accordance with the principles set out in international financial reporting standards. In other words, it’s a fancy way of accurately tracking a business’s financial leases so that the organization can make informed decisions about its finances. Finance leases are long-term agreements between two parties – usually a leasing company and an entity/person who wants to use some asset as collateral – where the leasing company agrees to pay for the asset up front, in return for periodic payments over a period of time. Accounting for finance leases helps you keep on top of all the liabilities involved, ensuring your businesses finances are sound.