Sale and Leaseback (IFRS 16)
Related terms
Category
IFRS 16
A sale and leaseback transaction occurs when an entity sells an asset and immediately leases it back from the buyer. Under IFRS 16, the seller-lessee must determine whether the transfer qualifies as a sale under IFRS 15. If it does, the seller recognizes only the portion of the gain relating to the rights transferred, not the full sale gain.
Why it matters
Sale-leaseback transactions are a common financing strategy where organizations unlock capital from owned assets while retaining use. IFRS 16 changed the accounting significantly from IAS 17 by requiring partial gain recognition proportional to the rights transferred. This means the seller-lessee recognizes a gain only on the portion of the asset it no longer controls. The calculation requires careful allocation between the retained right-of-use and the rights transferred to the buyer-lessor.
How Arvexi handles this
Arvexi handles sale-leaseback transactions under both IFRS 16 and ASC 842 frameworks. The platform evaluates whether the transfer qualifies as a sale, calculates the partial gain or loss, measures the resulting ROU asset and lease liability, and generates the day-one journal entries, including the gain allocation that auditors examine closely.
Explore how Arvexi automates this: Lease Accounting · Lease Review