Operating leases are a type of agreement in which a lessor (the owner) agrees to provide a lessee (or tenant) with the use of an asset for a specified period of time. For accounting purposes, operating leases are treated similar to other forms of rent and can be recorded as either an expense or as a capitalized asset. Under the terms of an operating lease, the lessor continues to own the asset and is responsible for any maintenance or repairs needed. The lessee pays the lessor periodic payments over the term of the lease and typically has no option to purchase the asset at the end of the lease. By adopting this accounting treatment, companies are able to maintain more flexible cash flow, keep debt off their balance sheets and avoid paying taxes on equipment that is leased but not owned.