Sale and leaseback accounting
A sale and lease back transaction is a popular way for entities to secure long-term financing from substantial property, plant and equipment assets such as land and buildings. IFRS 16 made significant changes to sale and lease back accounting in comparison with IAS 17. A sale and leaseback transaction is one where an entity (the seller-lessee) transfers an asset to another entity (the buyer-lessor) for consideration and leases that asset back from the buyer-lessor.
The IFRS 16 guidance on ‘failed sales’ means that some sale-and-lease back transactions are accounted for as pure financing transactions by both lessors and lessees.