In this concluding part of the series titled “10 Steps to Unlocking an Understanding of Lease Accounting” , you will learn about what sales and leaseback transaction is, and how it is accounted for in the books of account. More precisely, you will learn how to treat sales and leaseback transaction whether it is classified as operating lease or  finance lease . To begin with, a sales and leaseback transaction is a transaction in which a seller sells its item of equipment or asset and immediately leases it back from the buyer. For example, if A Ltd, a dealer in the sale of machinery sells a machine to B Ltd on January 1, 2002 and immediately leases back the machine on that same day from B Ltd. This type of transaction is a sale and leaseback transaction. In this afore-mentioned transaction, A Ltd is both the seller and the leasee with respect to the leased machine. The main crux of sales and leaseback transaction is how to recognize the gain or loss on the sale ...

 In 10 STEPS TO UNLOCKING AN UNDERSTANDING OF LEASE ACCOUNTING – PART 1, we learned how to account for finance lease in the books of the leasee at the commencement of the lease and during the period of the lease. But in this second part i.e. 10 STEPS TO UNLOCKING AN UNDERSTANDING OF LEASE ACCOUNTING – PART 2, we shall consider finance lease from the perspective of a leasor. Here, we shall learn how to account for a finance lease at both the inception, and throughout the duration of the lease in the books of the leasor. Going forward also, we shall look at operating lease, and how this can be accounted for in both the leasee’s and the leasor’s books. Happy study all the way! STEP 5: How is finance lease recorded and treated in the books of account of the leasor at the commencement of lease period? In the books of the leasor, the finance lease is recognized (i.e. recorded) at the commencement of the lease as LEASE RENT RECEIVABLE which is an asset. The value of this ass...

10 STEPS TO UNLOCKING AN UNDERSTANDING OF LEASE ACCOUNTING – PART 1 A clear understanding of the principles of IAS 17, Lease, of the International Financial Reporting Standards is important in order to account for, strictly speaking,  the substance of a lease transaction instead of its legal form. This will be treated in this article-cum-lesson: 10 steps to unlocking an understanding of lease accounting. Please join me as we embark on this journey into the world of lease accounting. 🚀 Get reliable & affordable web hosting, VPS, and domain services with Truehost Nigeria! 💻🔥 Start your website today—fast, secure, & budget-friendly. Click here now!  👉  Truehost STEP 1: What is lease? You definitely want a simple and clear definition of what lease is as against the technical jargon used in IAS 17. So, in a simple language, lease is an arrangement whereby a person (or organization) obtained the right of use of a non-current asset from another person (o...