After studying this chapter, you should be able to: Describe and apply the lessee’s accounting for sale-leaseback transactions, explain the classification and accounting treatment for leases that involve real estate, explain and apply the classification approach under IAS 17 for a lessee. | 1 CHAPTER 20: LEASES 2 2 CHAPTER 20: Leases After studying Appendix 20A, you should be able to: 14. Describe and apply the lessee’s accounting for sale-leaseback transactions. 15. Explain the classification and accounting treatment for leases that involve real estate. After studying Appendix 20B, you should be able to: 16. Explain and apply the classification approach under IAS 17 for a lessee. 3 3 Appendix 20A: Other Lease Issues 4 4 Sale-Leaseback Transactions Transaction in which the property owner (seller—lessee) sells the property to another party (purchaser—lessor) and immediately leases it back from the new owner Example: company buys land and constructs a building, sells it to a property investor and then leases it back 5 LO14 Describe and apply the lessee’s accounting for sale-leaseback transactions. 5 Advantages of Sale-Leasebacks If equipment purchase has already been financed, a sale-leaseback can allow the seller to refinance at lower rates (if rates have decreased) Can provide additional working capital when liquidity is tight 6 LO14 Describe and apply the lessee’s accounting for sale-leaseback transactions. 6 Seller-Lessee Accounting If the transfer of the asset does not meet the criteria to be classified as a sale under IFRS 15, no sale is recognized by seller-lessee. The seller-lessee continues to recognize the transferred asset, and accounts for the amounts received as a financial liability However, if the seller-lessee gives up the ownership risks and benefits associated with the asset, the transaction is clearly a sale, and gain or loss recognition is appropriate Under ASPE, any profit on the sale of the assets that are leased back would be deferred and amortized over the lease on the same basis as the depreciation of the leased assets (if a capital lease) or in proportion to the rental payments (if operating lease) 7 LO14 Describe and apply the lessee’s accounting for sale-leaseback transactions. 7 Purchaser-Lessor Accounting Under a sale and . | 1 CHAPTER 20: LEASES 2 2 CHAPTER 20: Leases After studying Appendix 20A, you should be able to: 14. Describe and apply the lessee’s accounting for sale-leaseback transactions. 15. Explain the classification and accounting treatment for leases that involve real estate. After studying Appendix 20B, you should be able to: 16. Explain and apply the classification approach under IAS 17 for a lessee. 3 3 Appendix 20A: Other Lease Issues 4 4 Sale-Leaseback Transactions Transaction in which the property owner (seller—lessee) sells the property to another party (purchaser—lessor) and immediately leases it back from the new owner Example: company buys land and constructs a building, sells it to a property investor and then leases it back 5 LO14 Describe and apply the lessee’s accounting for sale-leaseback transactions. 5 Advantages of Sale-Leasebacks If equipment purchase has already been financed, a sale-leaseback can allow the seller to refinance at lower rates (if rates have decreased) Can .
