AASB 16 – Accounting for sale and leaseback

Measurement
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Overview of accounting by seller-lessee

A sale‑and‑leaseback transaction occurs when a seller‑lessee transfers an asset to a buyer‑lessor and leases the asset back for a specified period.

When the transfer meets the criteria for a sale under AASB 15 Revenue, the seller‑lessee:

derecognises the underlying asset
measures the proportion of the asset retained for use as a right‑of‑use asset
recognises a gain or loss relating to the rights transferred to the buyer‑lessor
recognises a lease liability for the leaseback.

The challenges

AASB 16 does not prescribe a specific method for determining the proportion of the asset transferred versus retained.

A common approach is to compare the lease liability with the fair value of the asset transferred.

When lease payments are fully or partially variable – including payments linked to an index or a rate – determining this proportion becomes more complex.

This guide provides illustrative examples and explores key issues in sale‑and‑leaseback arrangements involving variable lease payments from the seller‑lessee’s perspective.