What is included in lease payments?

Payments included in lease payments consist primarily of the amounts paid for the right to use an asset over the lease term, adjusted for any incentives received from the lessor. This means that when determining lease payments, one takes into account the base payments that a lessee must make for utilizing the leased asset.

This aligns well with accounting standards, which emphasize that lease payments not only cover the actual cash outflow for leasing an asset but also should exclude any incentives or discounts that a lessee might receive. Payments for asset maintenance, payments made by lessors to lessees, or payments related to purchasing an asset are distinct from lease payments as they do not fit this specific definition of what constitutes a lease obligation. Therefore, recognizing that lease payments reflect only the charges for the right to use the asset (net of any incentives) is key to understanding the overall accounting treatment of leases.