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Appendix 3 Sale and Leaseback Transactions that Result in Operating Leases The appendix is illustrative only and does not form part of the standards. The purpose of the appendix is to illustrate the application of the standards to assist in clarifying their meaning. A sale and leaseback transaction that results in an operating lease may give rise to profit or a loss, the determination and treatment of which depends on the leased asset's carrying amount, fair value and selling price. The table below shows the requirements of the Standard in various circumstances.
| Carrying amount equal to fair value | Carrying amount less than fair value | Carrying amount above fair value | Sale price established at fair value (paragraph 61) |
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| Profit | No profit | Recognise profit immediately | Not applicable | Loss | No loss | Not applicable | Recognise loss immediately | Sale price below fair value (paragraph 61) |
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| Profit | No profit | Recognise profit immediately | No profit (Note 1) | Loss not compensated by future lease payments at below market price | Recognise loss immediately | Recognise loss immediately | (Note 1) | Loss compensated by future lease payments at below market price | Defer and amortise loss | Defer and amortise loss | (Note 1) | Sale price above fair value (paragraph 61) |
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| Profit | Defer and amortise profit | Defer and amortise profit | Defer and amortise profit (Note 2) | Loss | No loss | No loss | (Note 1) |
| Note 1 | These parts of the table represent circumstances that would have been dealt with under paragraph 63 of the Standard. Paragraph 63 requires the carrying amount of an asset to be written down to fair value where it is subject to a sale and leaseback. | | |
| | Note 2 | The profit would be the difference between fair value and sale price as the carrying amount would have been written down to fair value in accordance with paragraph 63. |
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