IAS 17 (paragraph 60) states that if the leaseback is a
finance lease, the transaction is a means whereby the lessor
provides finance to the lessee, with the asset as security.
The standard states that for this reason it is not
appropriate for the lessee to regard an excess of sales proceeds
over the carrying amount as income. Instead, such excess is
deferred and amortised over the lease term. This is equivalent to
the first method in SSAP 21.
This means that the carrying balance of the asset is rebased
to the higher value (and depreciated in the normal manner) and a
corresponding credit is raised which represents the deferred income
to be recognised over the lease term.
The lease is treated in the same manner as any other finance
lease by the lessor if it is classified as a finance lease.
