Lease accounting: leasebacks and sub-leases: sale and operating leaseback under IFRS
If the leaseback is an operating lease, the seller-lessee has disposed of substantially all the risks and rewards of ownership of the asset, and so has realised a profit or loss on the disposal. Therefore both the sale and the lease are usually recognised as such. However, as under UK GAAP, the situation can be complicated if the sale is other than at fair value.
Sale at fair value
Where the sale is at fair value any profit or loss should be recognised immediately.
Sale at above fair value
If the sale price is above fair value, the excess over fair value shall be deferred and amortised over the period for which the asset is expected to be used.
Sale at below fair value
If the sale price is below fair value any profit or loss should be recognised immediately, unless the loss is compensated for by future lease payments at below market price. In this case the loss shall be deferred and amortised in proportion to the lease payments over the period to which the asset is expected to be used.