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    Lease

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    Alona Melad
    The document discusses accounting for sale and leaseback transactions where the seller becomes the lessee and the buyer becomes the lessor. It provides two cases: Case 1 where control of the asset transfers to the buyer-lessor, representing a sale, and Case 2 where control remains with the seller-lessee, not qualifying as a sale. For Case 1, it calculates the gain or loss on sale by allocating the proceeds between the rights transferred to the buyer and rights retained by the seller through the lease. For Case 2, as control remains with the seller, the full loss is recognized upfront rather than being allocated over the lease term.

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    Lease

    Uploaded by

    Alona Melad
    4 views1 page
    The document discusses accounting for sale and leaseback transactions where the seller becomes the lessee and the buyer becomes the lessor. It provides two cases: Case 1 where control of the asset transfers to the buyer-lessor, representing a sale, and Case 2 where control remains with the seller-lessee, not qualifying as a sale. For Case 1, it calculates the gain or loss on sale by allocating the proceeds between the rights transferred to the buyer and rights retained by the seller through the lease. For Case 2, as control remains with the seller, the full loss is recognized upfront rather than being allocated over the lease term.

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    The document discusses accounting for sale and leaseback transactions where the seller becomes the lessee and the buyer becomes the lessor. It provides two cases: Case 1 where control of the asset transfers to the buyer-lessor, representing a sale, and Case 2 where control remains with the seller-lessee, not qualifying as a sale. For Case 1, it calculates the gain or loss on sale by allocating the proceeds between the rights transferred to the buyer and rights retained by the seller through the lease. For Case 2, as control remains with the seller, the full loss is recognized upfront rather than being allocated over the lease term.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    4 views1 page

    Lease

    Uploaded by

    Alona Melad
    The document discusses accounting for sale and leaseback transactions where the seller becomes the lessee and the buyer becomes the lessor. It provides two cases: Case 1 where control of the asset transfers to the buyer-lessor, representing a sale, and Case 2 where control remains with the seller-lessee, not qualifying as a sale. For Case 1, it calculates the gain or loss on sale by allocating the proceeds between the rights transferred to the buyer and rights retained by the seller through the lease. For Case 2, as control remains with the seller, the full loss is recognized upfront rather than being allocated over the lease term.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 1

    P#28-21

    Sale and Leaseback -the seller will become the lessee, and the buyer will become the lessor
    it can be either:
    1. transfer of the asset is sale if the buyer-lessor will have a control on the asset transferred
    1. transfer of the asset is not a sale if the seller-lesee retains control on the asset transferred
    Case 1
    1. Fair Value 2,000,000.00
    Carrying Amount 2,150,000.00
    Gain or loss - 150,000.00 (Carrying Amt*%) Gain/(loss)
    2. - Fair Value % Carrying Amount
    Rights Retained (PV of Annual Lease) 926,604.00 0.46330 996,099.30 - 69,495.30
    (120,000x7.7217)
    Rights transferred (squeeze) 1,073,396.00 0.53670 1,153,900.70 - 80,504.70
    TOTAL 2,000,000.00 2,150,000.00 - 150,000.00

    Right to use asset 996,099.30


    (CA/FV)xRights Retained FV
    Case 2
    1. Fair Value 1,800,000.00
    Carrying Amount 2,150,000.00
    Total Loss - 350,000.00
    Present Value 926,604.00
    Less:Additional Financing 200,000.00 (Selling Price - Fair Value)
    Rights retained (PV) 726,604.00
    Right to use asset 2,150,000.00
    X 726,604.00 867,888.11
    1,800,000.00

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