AC2101 S1 2014 Seminar 5 Leases (Anil).pptx

If the sale price is above fair value the excess over

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Unformatted text preview: Lease Receivable 170 170 Dr COGS 100 100 Cr Inventory (100) (100) Cr Sale Revenue (160) (136) (10) (34) Discount rate Cr Unearned Interest Income 25 Application of FRS 17 to Sales Type Lease *  Question 1 26 13 Sale & Leaseback Transactions Ø། Lessee sells & leases asset back immediately from lessor Ø། Business case – why does the lessee do it? •  Raise funds for business operations (same idea as a reverse mortgage) •  Reduce uncertainty of future cash flows (like residual value on disposal) •  Reduce risks associated with asset ownership •  “Improve” financial position 27 Sale & Leaseback Implications *  Seller/Lessee *  Obtains immediate cash inflow from sale of asset to lessor à༎ gain or loss on asset disposal (& lower depreciation) à༎ current...
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This document was uploaded on 02/10/2014.

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