So let's take a look at the accounting for operating leases. We've got the same numbers as a finance lease accounting here, and you can see we've got an asset which costs 90 million a life of three years, an implicit interest rate of 5%, and we've calculated the lease payment using the payment function in Excel. So the economic calculation is exactly the same as a finance lease.

The lease liability, again, is identical to a finance lease. We take the beginning balance of 90, we calculate interest using the implicit interest rate of 5% times the beginning balance, and as the beginning balance drops, the accrued interest drops as well. The cash payment reduces the lease liability. So the lease liability for operating leases is the same as the lease liability for finance leases. No difference.

There is a difference for the leases asset. So unlike finance leases where we would typically straight line the depreciation, the least asset has to make sure that the balance sheet balances. Now, if the cash payments on the lease are the same as the rent expense, then the depreciation will just plug the leased asset to make sure the ending balance of the lease asset equals the ending balance of the lease liability. We have to do that because otherwise the balance sheet wouldn't balance as the accrued interest and the depreciation are not going to necessarily equal the rent expense in each year. There are some slight differences if the lease expense is not equal to the cash payment, for example, where you have a lease payment that's climbing steadily over time. And that could be true of things like real estate leases.

So lastly, and this is the critical difference here between IFRS and US GAAP. On the income statement, we're just going to expense rent expense as part of cost of goods sold and SG&A as normal. Here to calculate this, you would take the total lease payments over the whole period of the lease and divide by the number of years. This may mean in some cases the cash payment doesn't equal the rent expense.