SALE AND LEASEBACK

Question 1

In a Seller-Lessee Transaction, how do you initially recognize the ROU Asset at commencement date?

Answer 1

Cost = CA x (Right Retained/Fair Value)

Question 2

How do you solve for Right Retained?

Answer 2

PV of the Lease Liability
Less: Additional Financing (SP > FV)
Add: Prepayments (SP < FV)
—————————————————-
Right Retained

Question 3

How do you solve for the gain to be recognized in Sale and Leaseback Transaction?

(SELLER-LESSEE POV)

Answer 3

Total Gain x (Right Transferred/FV)

Question 4

How do you solve for the gain not Recognized?

(SELLER-LESSEE POV)

Answer 4

Total Gain x (Right Retained/FV)

Question 5

How do you solve for the right transferred?

Answer 5

FV - Right Retained = Right Transferred

Question 6

How do you solve for the total gain that the seller-lessee must recognize?

Answer 6

Fair Value
Less: Carrying Amount
===Total Gain

Question 7

How do you find the gain on sale and leaseback for a finance lease?

Answer 7

Total Gain x (Right Transferred/Fair Value)

Question 8

How do you find the gain on sale and leaseback for an operating lease?

Answer 8

FV
- CV
——-
Total Gain

Total Gain is the gain recognized for an operating lease.