ACCA FR · Chapter 6 · Question 9 of 9
Bunting Co sold a property to a finance company and leased it back. The terms give Bunting Co an option to repurchase the property at any time, so the transfer does not meet the IFRS 15 requirements to be accounted for as a sale. How should Bunting Co account for the transaction?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Keep the property in its SFP and recognise the proceeds as a financial liability under IFRS 9
Explanation
If control has not passed to the buyer, there is no sale. The seller-lessee keeps the asset and continues to depreciate it. The cash received is a financial liability (in substance a secured loan) accounted for under IFRS 9, with lease payments split between interest and repayment of that liability.
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