If a sale and leaseback transaction results in a finance lease, IFRS 16 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

IFRS 16 Leases requires the accounting treatment for any excess of sales proceeds over the carrying amount in a finance lease to be deferred and amortised over the lease term. This is because the excess represents a financing component of the lease, which should be amortised over the lease term to reflect the economic reality of the transaction. Therefore, choice C is the best option.

If a Sale and Leaseback Transaction Results in a Finance