If a sale and leaseback transaction results in a finance lease, AASB 117 Leases, provides the following accounting treatment for any excess of sales proceeds over the carrying amount:
A) recognise directly in retained earnings of the seller-lessee
B) immediately recognise as income by the seller-lessee
C) defer and amortise over the lease term
D) include in the capitalised amount of the leased asset.

Question

Quizplus · Accepted Answer

AASB 117 Leases requires that any excess of sales proceeds over the carrying amount in a finance lease resulting from a sale and leaseback transaction is deferred and amortised over the lease term. This is because the excess represents a gain that is recognised over the lease term as the asset is used by the lessee. Therefore, choice C is the best answer.

If a Sale and Leaseback Transaction Results in a Finance