Learn · Explainer

Lease payments in the cash flow statement

Where operating-lease and finance-lease payments are classified, with Microsoft's and Lowe's supplemental lease cash-flow tables.

The short answer

Under current US lease accounting, most cash rent on an operating lease is an operating cash outflow. The principal portion of a finance-lease payment is a financing outflow, and the interest portion is an operating outflow. Companies usually show the split in a supplemental lease table, not as a standalone line in the body of the cash flow statement.

Where the cash goes

The leases page covers how a lease appears on the balance sheet: a right-of-use asset and a lease liability. This page is about the cash. For an operating lease, payments that reduce the lease liability are classified as operating cash flows. For a finance lease, the principal portion is a financing cash flow and the interest portion is an operating cash flow, the same pattern used for ordinary debt service. That classification has applied to US public companies since the current lease standard took effect in 2019.

Microsoft and Lowe's

Microsoft's 10-K for fiscal 2026 includes a supplemental cash-flow table titled "Cash paid for amounts included in the measurement of lease liabilities." It reports operating cash flows from operating leases, operating cash flows from finance leases, and financing cash flows from finance leases. The same table also reports right-of-use assets obtained in exchange for lease obligations, which is a noncash addition of assets and liabilities (new leases signed or commenced), not a cash outflow.

Lowe's's 10-K for fiscal 2025 uses the same heading and a similar split: operating cash flows used for operating leases, operating cash flows used for finance leases, and financing cash flows used for finance leases. The wording ("from" versus "used for") differs; the three-way split is the same idea.

Source: Microsoft 10-K for fiscal 2026, filed Jul 29, 2026 · Lowe's 10-K for fiscal 2025, filed Mar 23, 2026

What to watch

The body of the cash flow statement may not isolate rent. Operating-lease payments are often folded into the operating total. The supplemental lease note is where the amounts are listed.
New leases are often noncash at commencement. The right-of-use asset and the liability are recorded when the lease starts. Cash starts leaving as payments are made.
Finance leases resemble borrowing. Principal in financing and interest in operating is the same pattern as a loan. That is why a company with many finance leases will show a financing outflow even when it has not issued a new bond.

Common questions

Where do operating-lease payments appear?

As operating cash outflows. Microsoft reports 'operating cash flows from operating leases' in a supplemental table; Lowe's reports 'operating cash flows used for operating leases.'

Where do finance-lease payments appear?

The principal portion is a financing cash outflow. The interest portion is an operating cash outflow. Both companies list financing cash flows from (or used for) finance leases.

What is 'right-of-use assets obtained in exchange for lease obligations'?

New lease assets and liabilities recorded when a lease commences, without cash changing hands at that moment. Microsoft discloses that amount next to the cash-paid table.

Is this the same as the lease liability on the balance sheet?

The liability is the remaining obligation. The cash-flow table tells you how much cash went out this period against lease liabilities, and in which section.

Where do I find the table?

In the leases note, often under a heading that starts with 'Cash paid for amounts included in the measurement of lease liabilities.'

Disclosures

Editor holdings: The editor holds no position in any company named on this page. As of Nov 11, 2026.
Compensation: Nobody paid for this page. No affiliate links on this page.
Sources: Each company's own SEC filings, linked next to each number.
Last updated: Nov 10, 2026

General education, the same for every reader. Not a recommendation to buy, sell or hold any security, and it doesn't consider your situation.

More in Learn and Tools · Methodology & Disclosures explains where every number comes from.