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P2-D2.
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poqipi11
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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
P2-D2
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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
poqipi11
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I’m sorry, I meant to ask if it did constitute a sale*
P2-D2
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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
poqipi11
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