What is the purpose of lease payments for the lessee?

The purpose of lease payments for the lessee is to obtain the right to use an asset. When a lessee enters into a lease agreement, they are essentially paying to access and utilize the asset for a specified period without transferring ownership. This arrangement allows the lessee to benefit from the asset's services, such as machinery, vehicles, or office space, while avoiding the costs and responsibilities associated with ownership, such as maintenance and depreciation.

In a lease, the lessee does not receive ownership of the asset; they are simply granted usage rights under the terms of the lease agreement. This provides flexibility to lessees who may require the asset for a limited time or prefer to avoid the upfront capital expenditure needed to purchase it outright.

Understanding this concept is crucial in corporate reporting and accounting, as it influences how leases are recorded and reported in financial statements, particularly under standards like IFRS 16 and ASC 842, which outline how lessees must recognize and measure leases.