Operating leases, also known as service leases, are established in such a way that the lessor may maintain the equipment and retain ownership thereof at the end of the lease. These arrangements are often done on an off-balance-sheet basis, meaning:

a.	This type of lease arrangement aids companies that need a cash infusion or that cannot take full advantage of the tax benefits from depreciation due to excessive operating losses.
	b.	It is important to eliminate cancellation policies to remain off the balance sheet.
	c.	Lease payments are reflected only on the income statement as an expense. Neither the assets nor the lease appears on the balance sheet.
	d.	Significant operating lease arrangements and the financial value of future lease commitments must be reported in a footnote to the cash flow statement