Under what condition are lease payments recorded as expenses?

Lease payments are recorded as expenses when the lease is less than a year in length because these types of leases are typically classified as operating leases under accounting standards. In an operating lease, lessees do not capitalize the lease on their balance sheet; instead, they simply treat lease payments as rental expenses in the income statement over the lease term.

This approach aligns with the concept of expense recognition as it reflects the consumption of resources in the period they are incurred, allowing for a straightforward and simpler accounting treatment for shorter-term leases. In contrast, longer-term leases or finance leases generally require capitalization and are subject to different accounting requirements. Additionally, the treatment of leases is influenced by their duration and terms, leading to the conclusion that brief leases result in an immediate expense recognition on the income statement.