BLM16015 - Lease accounting: leasebacks and sub-leases: sale and finance leaseback under IFRS
This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.
This page will be archived at the end of February 2026.
IAS 17 (paragraph 60) states that if the leaseback is a finance lease, the transaction is a means whereby the lessor provides finance to the lessee, with the asset as security.
The standard states that for this reason it is not appropriate for the lessee to regard an excess of sales proceeds over the carrying amount as income. Instead, such excess is deferred and amortised over the lease term. This is equivalent to the first method in SSAP21.
This means that the carrying balance of the asset is rebased to the higher value (and depreciated in the normal manner) and a corresponding credit is raised which represents the deferred income to be recognised over the lease term.
The lease is treated in the same manner as any other finance lease by the lessor if it is classified as a finance lease.