ACCA P2考試：Sale and Leaseback Transactions

1. Background

Key point:

In a sale and leaseback transaction, a company transfers legal title to an asset to another party, but retains use of asset on a lease. The usual purpose is to raise finance.

The rentals and the sale price are usually interdependent, as they are negotiated as a package and need not represent fair values.

Accounting treatment depends on whether the leaseback is finance or operating.

2. Sale and Leaseback as Finance Lease

Key point:

The substance of the sale and leaseback as a finance lease transaction is that there is no sale; risks and rewards of ownership have not passed from the original lessee.

Any excess of sales proceeds over the carrying amount are not immediately recognised as income in the financial statements of a seller-lessee. If such an excess is recognised, it is deferred and amortised over the lease term.

If the leaseback is a finance lease, the transaction is a means whereby the lessor provides finance to the lessee, with the asset as security.

Treat the transaction as a sale followed by a leaseback:

A "profit" is recognised but deferred (i.e. it is carried as a credit balance in the statement of financial position and released to the statement of comprehensive income over the life of the lease).

The asset and lease creditor are reinstated at the fair value of the asset.

Some accountants would argue that IAS 17 is wrong in its treatment of sale and finance leases. They argue that the transaction is a financing transaction and all that should be recognised would be the receipts of cash (Dr) and the recognition of a liability (Cr).

They argue that the asset is purely for security in case of default on the payment, and therefore no sale has taken place and no profit, even if deferred, should be recognised.

3. Sale and Leaseback as an Operating Lease

Key point:

Substance of the transaction is that there is a sale and profit is recognised.

If the leaseback is an operating lease and the rentals and the sale price are established at fair value, this is effectively a normal sale transaction and any profit or loss is recognized immediately.

If the sale price is below fair value, any profit or loss is recognised immediately except that:

If the loss is compensated by future rentals at below market price, it is deferred and amortised in proportion to the rental payments over the period for which the asset is expected to be used.

If the sale price is above fair value, the excess over fair value is deferred and amortised over the period for which the asset is expected to be used.