Skip to main content
IFRS Academy

CERTYNEX IFRS ACADEMY

My account — Professional

Search the Academy

Home
My learning path
Exercises & quizzes
Cases
Workpapers
Exams
My progress

Workpapers

Workpaper template

WorkpaperIFRS 16 — LeasesL3 · L4

Sale and leaseback transaction for the seller-lessee

2 missions11 sections to document50 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

Determine whether the transaction is a sale and leaseback and whether the transfer is a sale under IFRS 15; if so, adjust for off-market terms, measure the lease liability of the leaseback, the right-of-use asset retained and only the gain relating to the rights transferred; otherwise, recognise a financial liability. Record the corresponding entry.

11 sections · 40 blocks · 7 calculations · 2 entries

  • IFRS 16 §98
  • IFRS 16 §99
  • IFRS 16 §100
  • IFRS 16 §101
  • IFRS 16 §102
  • IFRS 16 §102A
  • IFRS 16 §103
  • IFRS 16 §B45
  • IFRS 16 §B46
  • IFRS 16 §B47

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

2 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Sale and leaseback of the head office and disclosures by the seller-lessee
Case tasks documented here
  • Is the transaction a sale and leaseback transaction and is the transfer a sale?
  • Calculate the lease liability at 1 January 20X1.
  • Calculate the right of use retained and the gain to be recognised on the rights transferred.
  • Which entry do you record at 1 January 20X1?
1

Inputs

Inputs

  • Sale and leaseback contracts (asset, parties, terms of the leaseback)

    TextRequired

  • Date of the transfer

    DateRequired

    20X1-01-01

  • Sale price received (transfer that is a sale)

    NumberRequired

    10,000,000

    Enter the sale price only if the transfer is a sale: the datum drives the sale and leaseback entry. Otherwise, use the amount received for the financial liability.

  • Fair value of the asset transferred

    NumberRequired

    10,000,000

  • Carrying amount of the asset at the date of the transfer

    NumberRequired

    6,400,000

  • Leaseback lease payment no. 1

    NumberRequired

    1,200,000

  • Timing of payment no. 1 (number of periods from the commencement date)

    NumberRequired

    1 units

  • Leaseback lease payment no. 2

    Number

    1,200,000

  • Timing of payment no. 2 (number of periods from the commencement date)

    Number

    2 units

  • Leaseback lease payment no. 3

    Number

    1,200,000

  • Timing of payment no. 3 (number of periods from the commencement date)

    Number

    3 units

  • Leaseback lease payment no. 4

    Number

    0

  • Timing of payment no. 4 (number of periods from the commencement date)

    Number

    0 units

  • Leaseback lease payment no. 5

    Number

    0

  • Timing of payment no. 5 (number of periods from the commencement date)

    Number

    0 units

  • Periodic discount rate of the leaseback

    NumberRequired

    5 %

  • Lease liability of the leaseback (sum of the present values below)

    NumberRequired

    3,267,897.63

  • Total gain on the sale (fair value less carrying amount)

    NumberRequired

    3,600,000

  • Basis for splitting rights retained and rights transferred

    TableRequired

    RIGHTS_RETAINED · 3,267,897.63 | RIGHTS_TRANSFERRED · 6,732,102.37

    The standard requires the right-of-use asset to be measured at the proportion of the previous carrying amount that relates to the right of use retained and only the gain relating to the rights transferred to be recognised (para. 100), without imposing a key: the ratio of the present value of the lease payments at market terms to fair value, used here, is a method proposed by this workpaper. Off-market terms are adjusted first (paras. 101 and 102).

  • Row of the rights retained

    ChoiceRequired

    Rights retained by the seller-lessee

    Rights retained by the seller-lessee / Rights transferred to the buyer-lessor

  • Row of the rights transferred

    ChoiceRequired

    Rights transferred to the buyer-lessor

    Rights retained by the seller-lessee / Rights transferred to the buyer-lessor

  • Transfer that is not a sale: amount received (IFRS 9 financial liability)

    Number

2

Supporting evidence

Evidence

  • Evidence obtained and referenced (category, document reference)

    EvidenceRequired

3

Whether the transfer is a sale

Analysis

IFRS 16 §98IFRS 16 §99IFRS 16 §103IFRS 16 §B45IFRS 16 §B46IFRS 16 §B47

  • Analysis of the transfer

    ChecklistRequired

    • The seller-lessee controls the asset before the transfer: sale and leaseback
    • Legal title obtained briefly without control: lease, not a sale and leaseback
    • IFRS 15 requirements on when a performance obligation is satisfied
    • Transfer that is not a sale: asset retained and financial liability under IFRS 9
4

Transfer that is a sale

Analysis

IFRS 16 §100IFRS 16 §101IFRS 16 §102IFRS 16 §102A

  • Measurement by the seller-lessee

    Checklist

    • Right-of-use asset at the proportion of the previous carrying amount relating to the right retained
    • Only the gain or loss relating to the rights transferred is recognised
    • Off-market terms: prepayment (below market) or additional financing (above market)
    • Subsequent measurement: no gain or loss on the right of use retained
5

Lease liability, right retained and gain

Calculations

IFRS 16 §100IFRS 16 §101

  • Present value of lease payment no. 1

    CalculationRequired

    1,142,857.14

    Leaseback lease payment no. 1 ; Periodic discount rate of the leaseback ; Timing of payment no. 1 (number of periods from the commencement date)

  • Present value of lease payment no. 2

    Calculation

    1,088,435.37

    Leaseback lease payment no. 2 ; Periodic discount rate of the leaseback ; Timing of payment no. 2 (number of periods from the commencement date)

  • Present value of lease payment no. 3

    Calculation

    1,036,605.12

    Leaseback lease payment no. 3 ; Periodic discount rate of the leaseback ; Timing of payment no. 3 (number of periods from the commencement date)

  • Present value of lease payment no. 4

    Calculation

    0

    Leaseback lease payment no. 4 ; Periodic discount rate of the leaseback ; Timing of payment no. 4 (number of periods from the commencement date)

  • Present value of lease payment no. 5

    Calculation

    0

    Leaseback lease payment no. 5 ; Periodic discount rate of the leaseback ; Timing of payment no. 5 (number of periods from the commencement date)

  • Right-of-use asset retained (proportion of the carrying amount)

    CalculationRequired

    2,091,454.48

    Carrying amount of the asset at the date of the transfer ; Basis for splitting rights retained and rights transferred ; Row of the rights retained

  • Gain on the rights transferred

    CalculationRequired

    2,423,556.85

    Total gain on the sale (fair value less carrying amount) ; Basis for splitting rights retained and rights transferred ; Row of the rights transferred

6

Journal entries

Entries

  • Seller-lessee: sale and leaseback

    EntryRequired

    AccountDebitCredit
    Cash10,000,000
    Right-of-use asset2,091,454.48
    Asset transferred6,400,000
    Lease liability (including any additional financing)3,267,897.63
    Gain on the rights transferred2,423,556.85

    The entry balances when the lease liability includes any additional financing (price above fair value) and the basis of the rights retained excludes that financing (para. 101).

  • Transfer that is not a sale: financial liability

    Entry

    Debit Cash ← Transfer that is not a sale: amount received (IFRS 9 financial liability) ; Credit Financial liability ← Transfer that is not a sale: amount received (IFRS 9 financial liability)

7

Is the transfer a sale?

Judgment

IFRS 16 §99IFRS 16 §103IFRS 16 §B46IFRS 16 §B47

  • Qualification of the transfer

    JudgmentRequired

    Sale under IFRS 15: sale and leaseback accounted for under paragraph 100

    Sale under IFRS 15: sale and leaseback accounted for under paragraph 100 / Not a sale: asset retained and financial liability / Not a sale and leaseback (control never obtained): lease

  • Rationale: facts relied on, analysis, alternative rejected

    TextRequired

8

Conclusion

Conclusion

  • Conclusion on the sale, right retained, gain on the rights transferred and entry

    ConclusionRequired

9

Financial statement impact

FS impact

  • Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

    TableRequired

10

Items passed on to the lessee's note

Disclosure

IFRS 16 §100IFRS 16 §103

  • Items documented for the note (Disclosure workpaper)

    Checklist

    • Gain or loss recognised on the rights transferred
    • Amount recognised as a financial liability when the transfer is not a sale
11

Normative references

References

  • Paragraphs cited in this workpaper (verification status shown from the register)

    References

12

Checks and financial statement impact

  • The qualification of the transfer is documentedPass
  • The lease liability equals the sum of the present valuesPass
  • The right-of-use asset retained is determinedPass
  • The sale and leaseback entry is balancedPass
  • The financial liability entry is balancedNot evaluated
Assets
5,691,454.48
Liabilities
3,267,897.63
Profit or loss
2,423,556.85
OCI
0
Equity
2,423,556.85