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Section 8140: Sale-Leaseback Transactions
1. Sale-Leaseback
(1) Entity A sell a property to Entity B
(2) Entity B leases the property to Entity A
(3) Entity A is the seller-lessee
(4) Entity B is the purchaser-lessor
2. Classification of sale-leaseback by seller-lessee
(1) Sale-capital-leaseback
(2) Sale-operating-leaseback
3. Classification of sale-leaseback by purchaser-lessor
(1) Purchase-direct-financing-leaseback
(2) Purchase-operating-leaseback
4. Sale-capital-leaseback
(1) The lease meets one of (A), (B), (C), (D)
(2) A gain or loss on the sale of property is deferred
(3) Deferred gain or loss on the sale of property is amortized
--> in proportion to the amortization of the leased asset
5. Sale-operating-leaseback
(1) The lease does not meets any of (A), (B), (C), (D)
(2) A gain or loss on the sale of property is deferred
(3) Deferred gain or loss on the sale of property is amortized
--> in proportion to the rent expense charged over the lease term
6. Purchase-direct-financing-leaseback
(1) The lease meets one of (A), (B), (C), (D) and both of (E), (F)
(2) Record the purchase of property
(3) Apply the accounting for a direct financing lease
7. Purchase-operating-leaseback
(1) The lease does not meet the requirement for a direct financing lease
(2) Record the purchase of property
(3) Apply the accounting for an operating lease
8. Exceptions:
Case 1. The seller-lessee leases only a minor portion
--> of the remaining use of the property
Case 2. The seller-lessee retains
--> more than a minor portion
--> but less than substantially all
--> of the remaining use of the property
and
--> gain on the sale > (2a) or (2b)
(2a) recorded amount of leased asset
(2b) present value of minimum lease payments
Case 3. Fair value of the property < undepreciated cost
9. Accounting
Case 1: The sale and the leaseback are recorded
--> as "separate" transactions
Case 2: 1. Sale-capital-leaseback
--> Gain on the sale - (2a) is
--> recognized at the time of sale
2. Sale-operating-leaseback
--> Gain on the sale - (2b) is
--> recognized at the time of sale
Case 3: A loss is recognized at the time of sale
--> up to the amount of (3a)
(3a) = undepreciated cost - fair value
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