Assuming that the transaction doesn’t constitute as a sale, how will the net effect result in reduction of financial gearing? This scenario is from bpp question 212
If it does not constitute a sale then the asset is still recognised and we recognise a liability for the transfer proceeds, i.e. a loan. Based on this then I’d expect the debt to increase.
If it does constitute a sale then we recognise a profit on the sale and remove the initial asset but replace it with a right-of-use asset measured at a carrying amount linked to the rights retained.