SALE AND LEASEBACK-OPERATING LEASE

Hie Mike,

The standard states that if the seller of an asset makes a loss or profit on sale , this should be recognised immediately in P/L.However it gets interesting if the market value of the lease payments is highier than the actual payments required by the lessor. Any loss made on the sale of the asset(FV>selling price) can be deffered and armotised over the lease term IN ORDER to offset against the gain in lease payments .How do we recognise this ?For example if the seller made a $5000 loss on sale and leases the asset back under an operating lease for 8 years (the asset has perhaps 50 yrs remaining).On the other hand the lessor makes $200 loss on the lease payments given that the market value of lease payments of related assets is highier than the actual lease payment.

My understanding is the $5000 loss will be armitised over 8 years($625/ yr) yet the $200 gain on lease payments will reduce it to $425 which is ultimately recognised as a loss on sale in profit or loss per year.So is this $5000 a non current asset until the loss is finally written off?