- This topic has 3 replies, 2 voices, and was last updated 10 years ago by
.
- Posts
how does gain is spread in sale and finance lease back when any gain on sale (proceeds in excess of carrying value) should be deferred, and benefits recognised over the finance lease term.
• the double entry:
DR Cash CR Obligations under finance lease.
will automatically spread the profit over the lease term.?Hi Rameez
Can I ask that you check the thread started by Kerri on November 18 with the subject “operating leases”
I think that I have answered the same query there.
Still not happy? Post again
my question is about the sale and finance lease back…
how does gain is spread in sale and finance lease back when the entry beingDR Cash CR Obligations under finance lease.
I still think that my post to which I have referred answers your question.
However, you appear not to be happy with it so here it is in different words.
The obligation under the finance lease includes the profit element of the sale. That obligation is settled over the period of repayment of the finance lease creditor. Instead of crediting the “profit on disposal” to PorL as we would on a “normal” sale of an asset, the profit is included in the calculation of the “sale price” ie the cash receipt from the finance lease creditor.
Thus the repayment over a period of time spreads the benefit of the sale over that finance lease period
Is that better?
- You must be logged in to reply to this topic.