In short
In a sale-leaseback, an owner sells an asset and leases it back from the buyer. If the transfer qualifies as a sale under the revenue guidance, the seller-lessee derecognizes the asset, recognizes any gain or loss and accounts for the leaseback as a lease.
Key takeaways
- If the leaseback is a finance lease, or the seller has a repurchase option that doesn't qualify, there is no sale: the seller keeps the asset and records a financial liability.
- In a failed sale, the buyer-lessor records a receivable rather than the asset.
- Gains are adjusted if the sale price isn't at fair value.
Where it's tested
FAR: Leases — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
In a sale-and-leaseback, the transfer of the asset does not qualify as a sale under ASC 606. How does the seller-lessee account for the transaction?