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Chapter 8
Example 8
Sale and leaseback
On 31 December 20X1, Oryx sold a factory building (an item of property, plant
and equipment) to Crake for its fair value of $20 million. The asset had a
carrying amount of $7 million prior to the sale. This sale represents the
satisfaction of a performance obligation, in accordance with IFRS 15 Revenue
from Contracts with Customers. Oryx enters into a contract with Crake for the
right to use the asset for the next five years. Annual payments of $1.5 million
are due at the end of each year. The present value of the annual lease
payments is $5.7 million.
How will this be accounted for by both Oryx and Crake on 31 December
20X1?
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