RGH entered into a sale-leaseback arrangement of its manufacturing plant. When should RGH recognize the gain on the sale fo the plant under IAS GAPP? A. Recognize immediately if lease is an operating lease and defer gain if the lease is a capital lease. B. Defer gain if lease is an operating lease and recognize immediately if capital lease C. Defer gain either way D. Recognize gain immediately either way According to Schweser, the answer is A. I don’t understand; the study notes made it seem as though you recognize the gain immediately when employing a sales-type capital lease. Any thoughts?
The question asks for IAS GAAP, not US GAAP.
According to IAS GAAP If the sale leaseback results in a capital lease, any profit and loss should be deferred and recognized over the lease term. (In US GAAP, recognized immidiately) If the sale lease back results in operating lease *If sale price = fair value, recognize any gain/loss * Sale price fair value, gains deffered over lease term
ok. thank you How did you know this though? As far as I can tell, the schweser notes make no mention of how US and IAS GAAP differ in terms of recognizing gains on a lease.
hey skrillin, are you using 2007 schweser notes? I don’t find that information neither. But why do you have Book 7? Aren’t there only 6 books?
Book 7 is optional, does not come with the standard package.
skriilin, sale leaseback is briefly mentioned in the CFAI book, and it does mention how to treat gain & loss if it is a capital or operating lease. While reading this, I needed more clarification and I googled it, some website had a far better explanation, so I jotted it down in my notes.