Sale and leaseback — Accounting glossary

First assess whether the transfer is a sale under IFRS 15’s requirements. If it is a sale, the seller-lessee measures the right-of-use asset relating to the leaseback as the proportion of the previous carrying amount related to the right retained, and recognises only the gain or loss relating to the rights transferred, subject to relevant IFRS 16 requirements. Off-market terms and variable payments may require further adjustments. If no sale occurs, account for a financing transaction.

Worked example

An asset with carrying amount $800,000 is sold at fair value for $1 million and leased back. If 40% of the right of use is retained, the seller recognises a $320,000 right-of-use asset and a $120,000 gain relating to the 60% transferred, before other adjustments.

Common mistake

Recognising the entire $200,000 gain immediately without considering the rights retained, or treating every transfer as a sale without applying IFRS 15.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	FR	Direct	September 2026–June 2027
ACCA	SBR	Direct	September 2026–June 2027