Accounting

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Accounting

  1. 1. Sale and leaseback-is an arrangement whereby oneparty sells a property to anotherparty and then immediately leasesthe property back from its newowner
  2. 2. Thus, the seller becomes a seller-lessee and the purchaser, apurchaser-lessor .A sale and leaseback transaction mayoccur when the seller-lessee isexperiencing cash flow or financingproblem or because there are taxadvantages in such an arrangement inthe lessee’s jurisdiction.
  3. 3. Moreover, the seller-lessee would liketo avoid the burden of paying the executory costsattendant to the asset,such as repairs, insurance and taxes. The important consideration in a sale and leaseback transaction is the recognition of two separate and distinct transactions. However, it is important to note that there is no physical transfer of asset. First, there is a sale of property and there is a lease agreement for the same property in which the seller is the lessee and the buyer is the lessor.

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