Sale and leaseback
A transaction where an entity sells an asset to a buyer and simultaneously leases the same asset back from the buyer.
Definition
In a sale and leaseback, an entity transfers ownership of an asset (for example, a building or piece of equipment) to a buyer and enters into a lease to continue using the asset. Whether the transfer qualifies as a sale under IFRS 15 determines how the leaseback is accounted for. If the transfer is a sale, the seller-lessee recognises only a right-of-use asset for the retained right to use, and records a gain or loss on the proportion of the asset sold. If the transfer is not a sale (often the case in lease financing arrangements), it is treated as a secured borrowing.
Why it matters
Sale and leaseback transactions require careful analysis to determine whether the sale recognition criteria are met. Getting the accounting wrong can materially mistate reported assets, liabilities, and gains.
In AuditLease
Sale and leaseback accounting is not currently a core AuditLease feature and is outside the current MVP scope. Users with sale and leaseback arrangements should seek specialist accounting advice.
Related terms
Official sources
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence, so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.