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U.S. GAAP Codification of Accounting Standards |
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U.S. GAAP Accounting Standards |
| Codification Topic 840-40 Sale-Leaseback Transactions Leases SFAS 13, November 1976 "Accounting for Leases" 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 Classification of sale-leaseback by seller-lessee 1. Sale-capital-leaseback 2. Sale-operating-leaseback Classification of sale-leaseback by purchaser-lessor 1. Purchase-direct-financing-leaseback 2. Purchase-operating-leaseback 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 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 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 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 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 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 Capital lease criteria (A) Ownership transfer --> Ownership is transferred by the end of the lease term (B) Bargain purchase option -> Lessee has an option purchase at the price lower than the fair value (C) Lease term: 75% rule --> Lease term ≥ 75% of economic life of the lease property (D) Minimum lease payment: 90% rule --> Present value of minimum lease payments > 90% of fair value of the lease property Additional criteria for lessor (E) Collectibility of minimum lease payment --> reasonably predictable (F) No important uncertainties --> about the additional costs to be incurred by lessor --> when such costs are not reimbursable |
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Codification Topic 840 Leases |
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Subtopics of Codification Topic 840 840-10 Overall 840-20 Operating leases 840-30 Capital leases 840-40 Sale-leaseback transactions |
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Accounting Terms of Codification Topic 840-10 Bargain purchase option Bargain renewal option Capital lease Contingent rentals Direct financing lease Estimated economic life Estimated residual value Fair value of leased property Fiscal funding clause Heat supply (or burn-up) contracts Incremental borrowing rate Indirectly related to the leased property Interest rate implicit in the lease Lease Lease inception Lease term Leveraged lease Minimum lease payments Noncancelable lease term Operating lease Penalty Probable Reasonably possible Remote Sales-type lease Significant influence Sublease Substantially all |
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Accounting Terms of Codification Topic 840-20 Construction period lease payments Original lessee |
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Accounting Terms of Codification Topic 840-30 Advance refunding Delayed equity investment Interest method Nonrecourse financing |
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Accounting Terms of Codification Topic 840-40 Active use of the property Minor Normal leaseback Profit or loss on sale Property improvements or integral equipment Sale-leaseback accounting Sale recognition Wrap lease transaction |
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