Where a sale and leaseback arrangement involves the benefits and risks of ownership being maintained by the lessee:
A) the lease back is classified as a finance lease.
B) the owner has effectively refinanced the asset.
C) any profit on the sale should be deferred in the statement of financial position and amortised.
D) All of the given answers are correct.

Question

Quizplus · Accepted Answer

In a sale and leaseback arrangement where the lessee retains the benefits and risks of ownership, the leaseback is classified as a finance lease, indicating that the owner has effectively refinanced the asset. Consequently, any profit on the sale should be deferred and amortized over the lease term, making all the given answers correct.

Where a Sale and Leaseback Arrangement Involves the Benefits and Risks