Where a sale and leaseback results in the creation of an operating lease and the sales price varies from the fair value of the asset,the lessee:

Question

Quizplus · Accepted Answer

The lessee may either immediately recognise a profit or loss or defer and amortise it depending upon the carrying amount of the asset when sold and whether any loss is compensated for by future lease payments. This is because the creation of an operating lease results in the asset being removed from the lessee's balance sheet, which may result in a gain or loss depending on whether the sales price is higher or lower than the carrying amount of the asset. If any loss is compensated for by future lease payments, it may be reasonable to defer and amortise the loss over the lease term.

Where a Sale and Leaseback Results in the Creation of an Operating