Accounting for leases is a debatable subject in spite of variety of standards having been issued by the professional accounting bodies all over the world. Two important issues relate to the treatment of lease rentals and the disclosure of leased assets in the financial statements. Opinions are divided whether leased assets should be replaced by lessees or lessors. The Indian position is also confused and divided. In this paper, we have provided an evaluation of the accounting standards followed in USA,UK and the international accounting standards. We have also critically reviewed Exposure Draft and Guidance Note issued by the Institute of Chartered Accountants of India. A study of the practices of Indian companies with regard to the accounting of leases reveals the following: (a) operating method of treating lease rentals is followed; (b) leased assets are shown as own assets on historical basis in the balance sheets by leasing companies; (c) straight-line depreciation method is followed to depreciate the leased assets while written down value method is used incase of owned assets; (d) leased obligations are disclosed in footnotes by some lessees; (e) Indian companies consider leasing as an off-balance-sheet transaction; (f) Indian accounting practices are generally in line with legal prescriptions as under Indian Companies Act, 1956 and Income Tax Act, 1961.