Executory costs paid by the lessee associated with a capital lease are recorded as a component of the lease liability.

Executory Costs

Executory costs are the ongoing operating expenses in a lease agreement, such as insurance, maintenance, and property taxes, usually borne by the lessee.

Capital Lease

A lease treated as an acquisition of an asset and the incurrence of an obligation on the lessee's balance sheet, indicating a purchase and financing arrangement.

Lease Liability

An obligation representing the present value of future lease payments under a non-cancellable lease.