CTHRepealedLegislation
AASB 117 - Leases - July 2004
Illustrative Examples of Sale and LeasebIllustrative Examples of Sale and Leaseback Transactions that Result in Operating Leases
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Illustrative Examples of Sale and Leaseback Transactions that Result in Operating Leases
A sale and leaseback transaction that results in an operating lease may give rise to profit or a loss, the determination and treatment of which depends on the leased asset’s carrying amount, fair value and selling price. The table below shows the requirements of the Standard in various circumstances.
| Sale price at fair value(paragraph 61) | Carrying amount equal to fair value | Carrying amount less than fair value | Carrying amount abovefair value |
|---|---|---|---|
| Profit | no profit | recognise profit immediately | not applicable |
| Loss | no loss | not applicable | recognise loss immediately |
| Sale price below fair value(paragraph 61) | Carrying amount equal to fair value | Carrying amount less than fair value | Carrying amount abovefair value |
|---|---|---|---|
| Profit | no profit | recognise profit immediately | no profit(note 1) |
| Loss not compensated for by future lease payments at below market price | recognise loss immediately | recognise loss immediately | (note 1) |
| Loss compensated for by future lease payments at below market price | defer and amortise loss | defer and amortise loss | (note 1) |
| Sale price above fair value(paragraph 61) | Carrying amount equal to fair value | Carrying amount less than fair value | Carrying amount abovefair value |
|---|---|---|---|
| Profit | defer and amortise profit | defer and amortise excess of sale price over fair valuerecognise any excess of fair value over carrying amount immediately(note 3) | defer and amortise profit(note 2) |
| Loss | no loss | no loss | (note 1) |
Note 1 These parts of the table represent circumstances dealt with in paragraph 63 of the Standard. Paragraph 63 requires the carrying amount of an asset to be written down to fair value where it is subject to a sale and leaseback.