Under accounting standards, a lease is classified as a finance lease when it meets certain tests, such as transferring ownership at the end, covering most of the asset's useful life or having payments that are close to its full value. The company records a right-of-use asset and a lease liability, depreciates the asset and recognizes interest on the liability, much as if it had bought the asset with a loan.
Technology companies use finance leases for data centers, servers and network equipment. It lets them add capacity without paying the full price at once.
For investors it is important to look at, because these obligations can be large and may not appear in the same place as ordinary debt. They affect cash flow, interest costs and a company's flexibility, especially when spending on infrastructure is growing.
Read the lease notes in the report, compare lease obligations with cash and debt, and check when the payments fall due.