Open AccessThis paper investigates into the accounting and tax consequences of buying or leasing an asset in Hong Kong. If the finance rates on a borrowing and a lease are the same, it would be better to buy the asset as a taxpayer can enjoy the tax benefits through high depreciation allowances. If a taxpayer is not subject to tax, it will be better to lease the asset. The tax benefits enjoyed by the leasing company can then be passed on to the lessee in the form of reduced rental. The current practice of lease accounting is prescribed by IAS 17. The proposed “right-of-use model” suggests that all leases would give rise to assets and liabilities to lessees to the extent of the fair value of the rights and obligations that are conveyed by the leases. The suggested model is conceptually sound and may improve the quality of financial reporting.