CERTYNEX IFRS ACADEMY

In a three-party arrangement (manufacturer, lessor, lessee) involving industrial equipment, which statements are correct in determining whether there is a sale and leaseback transaction?

As soon as the lessee obtains legal title to the equipment before the lessor, the arrangement is a sale and leaseback.

If the lessee controls the equipment, or obtains control of it, before transferring it to the lessor, the arrangement is a sale and leaseback.

If the lessee does not obtain control of the equipment before its transfer to the lessor, the arrangement is accounted for as a lease.

IFRS 16 treats the arrangement as a sale and leaseback when the leaseback lasts at least 75% of the economic life of the equipment.

Where there is a sale and leaseback, whether the transfer is a sale is assessed under the IFRS 15 requirements on satisfying a performance obligation.