CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

According to IFRS, when a company sells property and then leases it back, any gain on the sale should usually be ______
A. recognized in the current year.
B. recognized at the end of the lease.
C. deferred and recognized as income over the term of the lease.
Explanation: The gain should be reported at the time of the sale.

User Contributed Comments 2

User Comment
CJPerugini According to IAS 17, this depends on how the leaseback is classified.
Finance Lease - Any excess proceeds over the carrying amount are deferred and amortized over the lease term.

Operating Lease - If transaction is below fair value then recognize immediately. If transaction is above fair value then excess proceeds over the carrying amount are deferred and amortized over the lease term.
maomao CJPerugini: in both cases you described, if there is a profit, we should amortize it over the lease term? I don't think so.
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