(6) Leases, Derivatives, Foreign Currency Accounting, and Income Taxes Flashcards
1
Q
When should a gain be recognized on the sale of a lease-back?
A
In the sale-leaseback transaction in question, the seller-lessee has retained the property. Therefore, any profit or loss on the sale should be deferred and amortized in proportion to the amortization of the leased asset, if a capital lease, or in proportion to the related gross rental charged to expense over the lease term, if an operating lease. Hence, neither recognizes the gain at the time of the sale-leaseback.
