Sale and repurchase agreements

Dear Mike, I would appreciate if you could explain the workings of Deferred income from BPP study text, why do we take only 3 years out of 5 in Non-current liabilities? Capital Co entered into a sale and finance lease on 1 April 20X7. It sold a lathe with a carrying amount of $300,00 for $400,00 and leased it back over a five-year period, equivalent to its remaining useful life.The finance lease provided for five annual payments in arrears of $90,000. The rate of interest implicit in the lease is 5%. Required What are the amounts to be recognised in the financial statements at 31 March 20X8 in respect of this transaction? Statement of profit or loss Profit on disposal (100,000 / 5) 20,000 Depreciation (400,000 / 5) (80,000) Interest (W) (20,000) Statement of financial position Non-current asset Property, plant and equipment (400,000 – 80,000) 320,000 Non-current liabilities Finance lease liability (W) 256,500 Deferred income (100,000 × 3/5) 60,000 Current liabilities Finance lease liability (330,000 – 256,500) (W) 73,500 Deferred income (100,000 / 5) 20,000