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Sales and leaseback

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Sales and leaseback

  • This topic has 3 replies, 2 voices, and was last updated 6 months ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
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    Posts
  • November 28, 2021 at 10:05 pm #641963
    poqipi11
    • Topics: 11
    • Replies: 8
    • ☆

    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

    December 1, 2021 at 12:41 pm #642206
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    Hi,

    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.

    Thanks

    December 1, 2021 at 7:27 pm #642235
    poqipi11
    • Topics: 11
    • Replies: 8
    • ☆

    I’m sorry, I meant to ask if it did constitute a sale*

    December 11, 2021 at 11:16 am #643874
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    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.

    Thanks

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