Financing lease accounting is an accounting method used to recognize a contract between a lessor and lessee. In a financing lease, the underlying asset is acquired by the lessee with the lessee making rent payments to the lessor throughout the life of the contract. The rent payments are treated as a loan repayment rather than a rental payment in this scenario. This arrangement allows the lessee to use the asset without incurring the upfront costs associated with the purchase. It also gives the lessor the right to repossess the asset should the lessee fail to make the required payments over time. Financing lease accounting is an effective way to manage cash flow while providing flexibility and security for both parties.