BLM16025 - Lease accounting: leasebacks and sub-leases: sale and operating leaseback under IFRS
This manual is being updated to reflect FRS 102 (2024 amendments). For guidance on the tax treatment of accounts prepared under IFRS 16 or the revised FRS 102, please refer to pages within the BLM50000 chapter.
This page will be archived at the end of February 2026.
If the leaseback is an operating lease, the seller-lessee has disposed of substantially all the risks and rewards of ownership of the asset, and so has realised a profit or loss on the disposal. Therefore both the sale and the lease are usually recognised as such. However, as under UK GAAP, the situation can be complicated if the sale is other than at fair value.
Sale at fair value
Where the sale is at fair value any profit or loss should be recognised immediately.
Sale at above fair value
If the sale price is above fair value, the excess over fair value shall be deferred and amortised over the period for which the asset is expected to be used.
Sale at below fair value
If the sale price is below fair value any profit or loss should be recognised immediately, unless the loss is compensated for by future lease payments at below market price. In this case the loss shall be deferred and amortised in proportion to the lease payments over the period to which the asset is expected to be used.