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Ias 17

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Sale and Leaseback with Finance Lease

If the resulting lease is a finance lease, then in fact, the transaction is a loan securitized by the leased asset and seller / lessee keeps recognizing the asset. Any excess of proceeds over the carrying amount of the leased asset is deferred and amortized over the lease term.

Sale and Leaseback with Operating Lease

If the resulting lease is an operating lease, then a seller/lessee derecognizes the asset and a buyer/lessor recognizes the asset. Further accounting treatment depends on the sale price:

f the sale price is close to asset’s fair value, then the profit or loss from sale should be recognized immediately.
If the sale price is below asset’s fair value, then it is necessary to check the rental payments. If the future payments are below market price, then the loss from the sale of asset should be amortized over the period of use. If the future payments are close to market rentals, then the loss from the sale of asset should be recognized immediately.
If the sale price is above fair value, then the excess over fair value or “profit from sale” should be deferred and amortized over the period of use.
Disclosures

IAS 17 prescribes a full load of disclosures for every type of the lease.

Except for general descriptions of the lease arrangements and other basic information about finance leases, both lessors and lessees are required to present reconciliation of future minimum lease payments (gross investment in the lease for the lessor) and their present value according to the period when they are due: not later than 1 year, later than 1 year and not later than 5 years; later than 5 years.

The same applies to operating leases, however, here both lessors and lessees are required to present the future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following

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