Which type of lease is recognized as an expense on the income statement?

An operating lease is recognized as an expense on the income statement because, under accounting standards, it typically does not involve the lessee assuming the risks and rewards of ownership of the asset. In an operating lease, the lessee merely pays for the right to use the asset for a specified period without taking it onto the balance sheet. The payment made for the lease is recorded as rent or lease expense in the income statement, reducing the lessee's net income.

In contrast, a capital lease (also known as a finance lease) is treated differently, as it is essentially viewed as a purchase of the asset. Under this arrangement, the asset is capitalized on the balance sheet, and the lessee recognizes both depreciation and interest expense, rather than simply lease expense. A sale-leaseback involves selling an asset and then leasing it back, which can have different accounting implications, depending on whether the transaction qualifies as a sale under the relevant accounting standards. Finally, a leverage lease typically involves a third-party financier and is structured differently, often leading to complex accounting that doesn't typically result in straightforward lease expense recognition on the income statement. Therefore, the clear and direct recognition of lease payment as expense in operating leases differentiates them from the other types listed.