The seller/lessee sells a building to the buyer/lessor for £800,000 cash. The carrying amount of the building prior to the sale was £600,000. The seller/lessee arranges to lease the building back for 5 years at £120,000 per annum, payable in arrears. The remaining useful life of the building is 15 years. The transaction satisfies the performance obligations in IFRS 15, so will be accounted for as a sale and leaseback. At the date of sale, the fair value of the building was £750,000, and the implied interest rate is 4.5%.

How will the lessee account for the transaction in the SOFP?

Answer rating: 100% (QA)

Given Transfer price BOOK value Fair value then the additional fin... View the full answer