Sale and Leaseback

Question 1

Relevant IFRS’?

Answer 1

IFRS 16 - Leases
IFRS 15 - Revenue from Contracts with Customers

Question 2

What is the key question?

Answer 2

Does the transaction constitute a sale?

Question 3

How is it determined whether a transaction constitutes a sale?

Answer 3

By considering when the performance obligation is satisfied as per IFRS 15.

Question 4

Transaction is a sale per IFRS 15

First step?

Answer 4

Measure the right-of-use asset at the proportion of the previous NBV relating to the right of use retained by the lessee

Question 5

Transaction is a sale per IFRS 15

First step calculation?

Answer 5

Original NBV x Present value of future lease payments / fair value

This will then be the ROUA in the SOFP

Question 6

Transaction is a sale per IFRS 15

Step 2?

Answer 6

Recognised the gain or loss on sale relating to the rights transferred

Question 7

Transaction is a sale per IFRS 15

Step 2 calculation?

Answer 7

Calculate gain = Fair value - NBV

Question 8

Transaction is a sale per IFRS 15

Step 3?

Answer 8

Calculate the rights retained

Question 9

Transaction is a sale per IFRS 15

Step 3 Calculation?

Answer 9

Gain (step 2) x PVFLP / Fair value

Question 10

Transaction is a sale per IFRS 15

Step 4 calculation?

Answer 10

Gain on rights transferred = total gain (step 2) - gain on rights transferred (step 3)

Question 11

Which step actually goes into the F/S?

Answer 11

Step 4 (Gain on disposal of rights transferred) and Step 1 (ROUA)

Question 12

What are the items that need to be accounted for?

Answer 12

The ROUA
The lease liability (normal way of calculating)
The gain on disposal of rights transferred