IFRS 16Chapter 16Lesson 1
Sale and leaseback transactions
Step 1 of 7Learning objectives
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An entity sells an asset and then leases it back. The first question comes from IFRS 15: has the buyer obtained control? If so, the seller-lessee keeps only the proportion of the previous carrying amount that relates to the right of use retained and recognises only the gain or loss on the rights transferred, after adjusting for off-market terms. If not, nothing is sold: the asset stays in the statement of financial position and the cash received is a financial liability.
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Learning objectives
- Determine, under the IFRS 15 requirements on transfer of control, whether the transfer of an asset in a sale and leaseback is a sale.
- Calculate the right-of-use asset retained and the gain or loss relating only to the rights transferred, then record the sale entry.
- Adjust a sale and leaseback made on off-market terms (prepayment of lease payments or additional financing).
- Explain the subsequent measurement of the lease liability arising from the leaseback and account for a transfer that is not a sale.