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Leases

Sale and leaseback

3.1 Is the transfer a ‘sale’?

If an entity (the seller-lessee) transfers an asset to another entity (the buyer-lessor)
and then leases it back, the seller-lessee must assess whether the transfer should be
accounted for as a sale.

Entities must apply IFRS 15 Revenue from Contracts with Customers (see Chapter
12) to decide whether a performance obligation has been satisfied.

3.2 Accounting treatment

Transfer is not a sale Transfer is a sale

Continue to recognise Derecognise the asset.
asset

Recognise a financial Recognise a right-of-use
liability equal to proceeds asset as the proportion of
received. the previous carrying
amount that relates to the
rights retained.

Recognise a lease liability.

A profit or loss on disposal
will arise.

Illustrations and further practice

Now try TYU 3 from Chapter 9.

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