What Is A Sale And Leaseback Agreement
Closing a sale-leaseback transaction allows the seller-lessee to immediately receive money from the buyer-lessor of the sale of the asset while retaining the right to use the asset. In addition, if the fair value of the asset is greater than its carrying amount, the closing of a sale-leaseback transaction may result in the seller-lessee recording of unmanistered earnings. Sale-leasebacks are not quick real estate transactions. Since buyers and sellers have long-term relationships with each other, both should make a significant review compared to a traditional transaction. Real estate agents and other experienced advisors are valuable resources to guide sellers through this process. If it is determined that the fair value of the asset is less than or greater than the contract selling price, the difference is recognised by the lessee as an additional loan or early repayment. Similarly, the lessor takes into account the difference in the form of a rental receivable or deferred rental income (if the lease is classified as an operating lease) or an adjustment by the finance lease debtor (if the lease is classified as a finance lease). This is illustrated in the following table: A sale-leaseback transaction allows property owners, such as real estate, to release the balance sheet capital they have invested in an asset without losing the ability to continue using it. The seller can then use this capital for other things, while the buyer has an asset that is immediately cash flowable. Call option not exercised: Successful sale-leaseback established at the end of 2025 If the disposal of the transaction qualifies as a sale in accordance with IFRS 15, it must be verified whether the sale price specified in the contract corresponds to the fair value of the asset.
While IFRS 13 For the fair value assessment is generally the standard that provides guidance on fair value, IFRS 13.6(b) recognises leases recognised in accordance with IFRS 16. .