香港会计准则14-租赁

SSAP 14 (February 2000)

SSAP 14

STATEMENT OF STANDARD ACCOUNTING PRACTICE 14

LEASES

(Issued October 1987; revid February 2000)

The standards, which have been t in bold italic type, should be read in the context of the background

material and implementation guidance and in the context of the Foreword to Statements of Standard

Accounting Practice and Accounting Guidelines. Statements of Standard Accounting Practice are not

intended to apply to immaterial items (e paragraph 8 of the Foreword).

Objective

The objective of this Statement is to prescribe, for les and lessors, the appropriate accounting

policies and disclosure to apply in relation to finance and operating leas.

Scope

1. This Statement should be applied in accounting for all leas other than:

2. This Statement applies to agreements that transfer the right to u asts even though substantial

a. lea agreements to explore for or u natural resources, such as oil, gas, timber, metals

b. licensing agreements for such items as motion picture films, video recordings, plays,

and other mineral rights; and

manuscripts, patents and copyrights.

rvices by the lessor may be called for in connection with the operation or maintenance of such

asts. On the other hand, this Statement does not apply to agreements that are contracts for

rvices that do not transfer the right to u asts from one contracting party to the other.

Definitions

3. The following terms are ud in this Statement with the meanings specified:

A lea is an agreement whereby the lessor conveys to the le in return for a payment or

ries of payments the right to u an ast for an agreed period of time.

A finance lea is a lea that transfers substantially all the risks and rewards incident to

ownership of an ast. Title may or may not eventually be transferred.

An operating lea is a lea other than a finance lea.

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SSAP 14 (February 2000)

A non-cancellable lea is a lea that is cancellable only:

a. upon the occurrence of some remote contingency;

b. with the permission of the lessor;

c. if the le enters into a new lea for the same or an equivalent ast with the same

d. upon payment by the le of an additional amount such that, at inception, continuation

lessor; or

of the lea is reasonably certain.

The inception of the lea is the earlier of the date of the lea agreement or of a commitment

by the parties to the principal provisions of the lea.

The lea term is the non-cancellable period for which the le has contracted to lea the

ast together with any further terms for which the le has the option to continue to lea

the ast, with or without further payment, which option at the inception of the lea it is

reasonably certain that the le will exerci.

Minimum lea payments are the payments over the lea term that the le is, or can be

required, to make excluding contingent rent, costs for rvices and taxes to be paid by and

reimburd to the lessor, together with:

a. in the ca of the le, any amounts guaranteed by the le or by a party related to

b. in the ca of the lessor, any residual value guaranteed to the lessor by either:

the le; or

i. the le;

ii. a party related to the le; or

iii. an independent third party financially capable of meeting this guarantee.

However, if the le has an option to purcha the ast at a price which is expected to be

sufficiently lower than the fair value at the date the option becomes exercisable that, at the

inception of the lea, is reasonably certain to be exercid, the minimum lea payments

compri the minimum payments payable over the lea term and the payment required to

exerci this purcha option.

Fair value is the amount for which an ast could be exchanged or a liability ttled, between

knowledgeable, willing parties in an arms length transaction.

Economic life is either:

a. the period over which an ast is expected to be economically usable by one or more

b. the number of production or similar units expected to be obtained from the ast by one

urs; or

or more urs.

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SSAP 14 (February 2000)

Uful life is the estimated remaining period, from the beginning of the lea term, without

limitation by the lea term, over which the economic benefits embodied in the ast are

expected to be consumed by the enterpri.

Guaranteed residual value is:

a. in the ca of the le, that part of the residual value which is guaranteed by the le

or by a party related to the le (the amount of the guarantee being the maximum

amount that could, in any event, become payable); and

in the ca of the lessor, that part of the residual value which is guaranteed by the le b.

or by a third party unrelated to the lessor who is financially capable of discharging the

obligations under the guarantee.

Unguaranteed residual value is that portion of the residual value of the lead ast, the

realisation of which by the lessor is not assured or is guaranteed solely by a party related to the

lessor.

Gross investment in the lea is the aggregate of the minimum lea payments under a finance

lea from the standpoint of the lessor and any unguaranteed residual value accruing to the

lessor.

Unearned finance income is the difference between:

a. the aggregate of the minimum lea payments under a finance lea from the standpoint

b. the prent value of (a) above, at the interest rate implicit in the lea.

of the lessor and any unguaranteed residual value accruing to the lessor; and

Net investment in the lea is the gross investment in the lea less unearned finance income.

The interest rate implicit in the lea is the discount rate that, at the inception of the lea,

caus the aggregate prent value of:

a. the minimum lea payments; and

b. the unguaranteed residual value

to be equal to the fair value of the lead ast.

The le's incremental borrowing rate of interest is the rate of interest the le would have

to pay on a similar lea or, if that is not determinable, the rate that, at the inception of the

lea, the le would incur to borrow over a similar term, and with a similar curity, the

funds necessary to purcha the ast.

Contingent rent is that portion of the lea payments that is not fixed in amount but is bad

on a factor other than just the passage of time (e.g., percentage of sales, amount of usage,

price indices, market rates of interest).

The definition of a lea includes contracts for the hire of an ast which contain a provision 4.

giving the hirer an option to acquire title to the ast upon the fulfilment of agreed conditions.

The contracts are sometimes known as hire purcha contracts.

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SSAP 14 (February 2000)

Classification of leas

5. The classification of leas adopted in this Statement is bad on the extent to which risks and

rewards incident to ownership of a lead ast lie with the lessor or the le. Risks include the

possibilities of loss from idle capacity or technological obsolescence and of variations in return

due to changing economic conditions. Rewards may be reprented by the expectation of

profitable operation over the ast's economic life and of gain from appreciation in value or

realisation of a residual value.

A lea is classified as a finance lea if it transfers substantially all the risks and rewards 6.

incident to ownership. A lea is classified as an operating lea if it does not transfer

substantially all the risks and rewards incident to ownership.

Since the transaction between a lessor and a le is bad on a lea agreement common to 7.

both parties, it is appropriate to u consistent definitions. The application of the definitions to

the differing circumstances of the two parties may sometimes result in the same lea being

classified differently by lessor and le.

Whether a lea is a finance lea or an operating lea depends on the substance of the 8.

transaction rather than the form of the contract. Examples of situations which would normally

lead to a lea being classified as a finance lea are:

a. the lea transfers ownership of the ast to the le by the end of the lea term;

b. the le has the option to purcha the ast at a price which is expected to be sufficiently

lower than the fair value at the date the option becomes exercisable such that, at the

inception of the lea, it is reasonably certain that the option will be exercid;

the lea term is for the major part of the economic life of the ast even if title is not c.

transferred;

at the inception of the lea the prent value of the minimum lea payments amounts to at d.

least substantially all of the fair value of the lead ast; and

the lead asts are of a specialid nature such that only the le can u them without e.

major modifications being made.

9. Indicators of situations which individually or in combination could also lead to a lea being

a. if the le can cancel the lea, the lessors loss associated with the cancellation are

b. gains or loss from the fluctuation in the fair value of the residual fall to the le (for

classified as a finance lea are:

borne by the le;

example in the form of a rent rebate equalling most of the sales proceeds at the end of the

lea); and

the le has the ability to continue the lea for a condary period at a rent which is c.

substantially lower than market rent.

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SSAP 14 (February 2000)

10. Lea classification is made at the inception of the lea. If at any time the le and the lessor

agree to change the provisions of the lea, other than by renewing the lea, in a manner that

would have resulted in a different classification of the lea under the criteria in paragraphs 5 to

9 had the changed terms been in effect at the inception of the lea, the revid agreement is

considered as a new agreement over its term. Changes in estimates (for example, changes in

estimates of the economic life or of the residual value of the lead property) or changes in

circumstances (for example, default by the le), however, do not give ri to a new

classification of a lea for accounting purpos.

Leas of land and buildings are classified as operating or finance leas in the same way as 11.

leas of other asts. However, a characteristic of land is that it normally has an indefinite

economic life and, if title is not expected to pass to the le by the end of the lea term, the

le does not receive substantially all of the risks and rewards incident to ownership. A

premium paid for such a leahold reprents pre-paid lea payments which are amortid over

the lea term in accordance with the pattern of benefits provided. A person holding a leahold

interest in land from the Government of the Hong Kong Special Administrative Region normally

receives all the risks and rewards incident to ownership and therefore such an interest is to be

accounted for in accordance with SSAP 13 "Accounting for investment properties" or SSAP 17

"Property, plant and equipment", as appropriate, instead of this Statement.

Leas in the financial statements of les

Finance leas

12. Les should recogni finance leas as asts and liabilities in their balance sheets at

amounts equal at the inception of the lea to the fair value of the lead property or, if lower,

at the prent value of the minimum lea payments. In calculating the prent value of the

minimum lea payments the discount factor is the interest rate implicit in the lea, if this is

practicable to determine; if not, the les incremental borrowing rate should be ud.

Transactions and other events are accounted for and prented in accordance with their substance 13.

and financial reality and not merely with legal form. While the legal form of a lea agreement is

that the le may acquire no legal title to the lead ast, in the ca of finance leas the

substance and financial reality are that the le acquires the economic benefits of the u of the

lead ast for the major part of its economic life in return for entering into an obligation to pay

for that right an amount approximating to the fair value of the ast and the related finance

charge.

If such lea transactions are not reflected in the les balance sheet, the economic resources 14.

and the level of obligations of an enterpri are understated, thereby distorting financial ratios. It

is therefore appropriate that a finance lea be recognid in the les balance sheet both as an

ast and as an obligation to pay future lea payments. At the inception of the lea, the ast

and the liability for the future lea payments are recognid in the balance sheet at the same

amounts.

It is not appropriate for the liabilities for lead asts to be prented in the financial statements 15.

as a deduction from the lead asts. If for the prentation of liabilities on the face of the

balance sheet, a distinction is made between current and non-current liabilities, the same

distinction is made for lea liabilities.

Initial direct costs are often incurred in connection with specific leasing activities, as in 16.

negotiating and curing leasing arrangements. The costs identified as directly attributable to

activities performed by the le for a finance lea, are included as part of the amount

recognid as an ast under the lea.

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SSAP 14 (February 2000)

17. Lea payments should be apportioned between the finance charge and the reduction of the

outstanding liability. The finance charge should be allocated to periods during the lea term

so as to produce a constant periodic rate of interest on the remaining balance of the liability

for each period.

In practice, in allocating the finance charge to periods during the lea term, some form of 18.

approximation may be ud to simplify the calculation.

A finance lea gives ri to a depreciation expen for the ast as well as a finance expen 19.

for each accounting period. The depreciation policy for lead asts should be consistent with

that for depreciable asts which are owned, and the depreciation recognid should be

calculated on the basis t out in SSAP 17 "Property, plant and equipment". If there is no

reasonable certainty that the le will obtain ownership by the end of the lea term, the

ast should be fully depreciated over the shorter of the lea term or its uful life.

The depreciable amount of a lead ast is allocated to each accounting period during the period 20.

of expected u on a systematic basis consistent with the depreciation policy the le adopts for

depreciable asts that are owned. If there is reasonable certainty that the le will obtain

ownership by the end of the lea term, the period of expected u is the uful life of the ast;

otherwi the ast is depreciated over the shorter of the lea term or its uful life.

The sum of the depreciation expen for the ast and the finance expen for the period is rarely 21.

the same as the lea payments payable for the period, and it is, therefore, inappropriate simply

to recogni the lea payments payable as an expen in the income statement. Accordingly, the

ast and the related liability are unlikely to be equal in amount after the inception of the lea.

To determine whether a lead ast has become impaired, that is when the expected future 22.

economic benefits from that ast are lower than its carrying amount, an enterpri applies

paragraphs 55 to 59 of SSAP 17.

Les should make the following disclosures for finance leas: 23.

a. for each class of ast, the net carrying amount at the balance sheet date;

b. a reconciliation between the total of minimum lea payments at the balance sheet date,

and their prent value. In addition, an enterpri should disclo the total of minimum

lea payments at the balance sheet date, and their prent value, for each of the

following periods:

i. not later than one year;

ii. later than one year and not later than five years;

iii. later than five years;

c. contingent rents recognid in income for the period;

d. the total of future minimum sublea payments expected to be received under non-

e. a general description of the les significant leasing arrangements including, but not

cancellable subleas at the balance sheet date; and

limited to, the following:

i. the basis on which contingent rent payments are determined;

ii. the existence and terms of renewal or purcha options and escalation claus;

and

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SSAP 14 (February 2000)

24. In addition, the requirements on disclosure in accordance with SSAP 17 "Property, plant and

iii. restrictions impod by lea arrangements, such as tho concerning dividends,

additional debt, and further leasing.

equipment" apply to the amounts of lead asts under finance leas that are accounted for by

the le as acquisitions of asts.

Operating leas

25. Lea payments under an operating lea should be recognid as an expen in the income

statement on a straight line basis over the lea term unless another systematic basis is

reprentative of the time pattern of the urs benefit.

For operating leas, lea payments (excluding costs for rvices such as insurance and 26.

maintenance) are recognid as an expen in the income statement on a straight line basis unless

another systematic basis is reprentative of the time pattern of the urs benefit, even if the

payments are not on that basis.

All incentives for the agreement of a new or renewed operating lea should be recognid as 27.

an integral part of the net consideration agreed for the u of the lead ast, irrespective of

the incentives nature or form or the timing of payments.

The le should recogni the aggregate benefit of incentives as a reduction of rental 28.

expen over the lea term, on a straight line basis unless another systematic basis is

reprentative of the time pattern of the les benefit from the u of the lead ast.

Costs incurred by the le, including costs in connection with a pre-existing lea (for example 29.

costs for termination, relocation or leahold improvements), should be accounted for by the

le in accordance with the Framework and Statements of Standard Accounting Practice

applicable to tho costs, including costs which are effectively reimburd through an incentive

arrangement.

Les should make the following disclosures for operating leas: 30.

a. the total of future minimum lea payments under non-cancellable operating leas for

b. the total of future minimum sublea payments expected to be received under non-

c. lea and sublea payments recognid in income for the period, with parate amounts

d. a general description of the les significant leasing arrangements including, but not

each of the following periods:

i. not later than one year;

ii. later than one year and not later than five years;

iii. later than five years;

cancellable subleas at the balance sheet date;

for minimum lea payments, contingent rents, and sublea payments;

limited to, the following:

i. the basis on which contingent rent payments are determined;

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SSAP 14 (February 2000)

ii. the existence and terms of renewal or purcha options and escalation claus;

iii. restrictions impod by lea arrangements, such as tho concerning dividends,

and

additional debt, and further leasing.

Leas in the financial statements of lessors

Finance leas

31. Lessors should recogni asts held under a finance lea in their balance sheets and prent

32. Under a finance lea substantially all the risks and rewards incident to legal ownership are

them as a receivable at an amount equal to the net investment in the lea.

transferred by the lessor, and thus the lea payment receivable is treated by the lessor as

repayment of principal and finance income to reimbur and reward the lessor for its investment

and rvices.

The recognition of finance income should be bad on a pattern reflecting a constant periodic 33.

rate of return on the lessors net investment outstanding in respect of the finance lea.

A lessor aims to allocate finance income over the lea term on a systematic and rational basis. 34.

This income allocation is bad on a pattern reflecting a constant periodic return on the lessors

net investment outstanding in respect of the finance lea. Lea payments relating to the

accounting period, excluding costs for rvices, are applied against the gross investment in the

lea to reduce both the principal and the unearned finance income.

Estimated unguaranteed residual values ud in computing the lessors gross investment in a lea 35.

are reviewed regularly. If there has been a reduction in the estimated unguaranteed residual

value, the income allocation over the lea term is revid and any reduction in respect of

amounts already accrued is recognid immediately.

Initial direct costs, such as commissions and legal fees, are often incurred by lessors in 36.

negotiating and arranging a lea. For finance leas, the initial direct costs are incurred to

produce finance income and are either recognid immediately in income or allocated against

this income over the lea term. The latter may be achieved by recognising as an expen the

cost as incurred and recognising as income in the same period a portion of the unearned finance

income equal to the initial direct costs.

Manufacturer or dealer lessors should recogni lling profit or loss in income for the period, 37.

in accordance with the policy followed by the enterpri for outright sales. If artificially low

rates of interest are quoted, lling profit should be restricted to that which would apply if a

commercial rate of interest were charged. Initial direct costs should be recognid as an

expen in the income statement at the inception of the lea.

Manufacturers or dealers often offer to customers the choice of either buying or leasing an ast. 38.

A finance lea of an ast by a manufacturer or dealer lessor gives ri to two types of income:

a. the profit or loss equivalent to the profit or loss resulting from an outright sale of the

ast being lead, at normal lling prices, reflecting any applicable volume or trade

discounts; and

the finance income over the lea term. b.

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SSAP 14 (February 2000)

39. The sales revenue recorded at the commencement of a finance lea term by a manufacturer or

dealer lessor is the fair value of the ast, or, if lower, the prent value of the minimum lea

payments accruing to the lessor, computed at a commercial rate of interest. The cost of sale

recognid at the commencement of the lea term is the cost, or carrying amount if different, of

the lead property less the prent value of the unguaranteed residual value. The difference

between the sales revenue and the cost of sale is the lling profit, which is recognid in

accordance with the policy followed by the enterpri for sales.

Manufacturer or dealer lessors sometimes quote artificially low rates of interest in order to attract 40.

customers. The u of such a rate would result in an excessive portion of the total income from

the transaction being recognid at the time of sale. If artificially low rates of interest are quoted,

lling profit would be restricted to that which would apply if a commercial rate of interest were

charged.

Initial direct costs are recognid as an expen at the commencement of the lea term becau 41.

they are mainly related to earning the manufacturers or dealers lling profit.

Lessors should make the following disclosures for finance leas: 42.

a. a reconciliation between the total gross investment in the lea at the balance sheet

date, and the prent value of minimum lea payments receivable at the balance sheet

date. In addition, an enterpri should disclo the total gross investment in the lea

and the prent value of minimum lea payments receivable at the balance sheet date,

for each of the following periods:

i. not later than one year;

ii. later than one year and not later than five years;

iii. later than five years;

43. As an indicator of growth it is often uful to also disclo the gross investment less unearned

b. unearned finance income;

c. the unguaranteed residual values accruing to the benefit of the lessor;

d. the accumulated allowance for uncollectible minimum lea payments receivable;

e. contingent rents recognid in income; and

f. a general description of the lessors significant leasing arrangements.

income in new business added during the accounting period, after deducting the relevant

amounts for cancelled leas.

Operating leas

44. Lessors should prent asts subject to operating leas in their balance sheets according to

45. Lea income from operating leas should be recognid in income on a straight line basis

the nature of the ast.

over the lea term, unless another systematic basis is more reprentative of the time pattern

in which u benefit derived from the lead ast is diminished.

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SSAP 14 (February 2000)

46. Costs, including depreciation, incurred in earning the lea income are recognid as an expen.

Lea income (excluding receipts for rvices provided such as insurance and maintenance) is

recognid in income on a straight line basis over the lea term even if the receipts are not on

such a basis, unless another systematic basis is more reprentative of the time pattern in which

u benefit derived from the lead ast is diminished.

47. Initial direct costs incurred specifically to earn revenues from an operating lea are either

deferred and allocated to income over the lea term in proportion to the recognition of lea

income, or are recognid as an expen in the income statement in the period in which they are

incurred.

All incentives for the agreement of a new or renewed operating lea should be recognid as 48.

an integral part of the net consideration agreed for the u of the lead ast, irrespective of

the incentives nature or form or the timing of payments.

The lessor should recogni the aggregate cost of incentives as a reduction of rental income 49.

over the lea term, on a straight line basis unless another systematic basis is reprentative of

the time pattern over which the benefit of the lead ast is diminished.

The depreciation of lead asts should be on a basis consistent with the lessors normal 50.

depreciation policy for similar asts, and the depreciation charge should be calculated on the

basis t out in SSAP 17.

To determine whether a lead ast has become impaired, that is when the expected future 51.

economic benefits from that ast are lower than its carrying amount, an enterpri applies

paragraphs 55 to 59 of SSAP 17.

A manufacturer or dealer lessor does not recogni any lling profit on entering into an 52.

operating lea becau it is not the equivalent of a sale.

Lessors should make the following disclosures for operating leas: 53.

a. for each class of ast, the gross carrying amount, the accumulated depreciation and

b. the future minimum lea payments under non-cancellable operating leas in the

c. total contingent rents recognid in income; and

d. a general description of the lessors significant leasing arrangements.

accumulated impairment loss at the balance sheet date; and

i. the depreciation recognid in income for the period;

ii. impairment loss recognid in income for the period;

iii. impairment loss reverd in income for the period;

aggregate and for each of the following periods:

i. not later than one year;

ii. later than one year and not later than five years;

iii. later than five years;

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SSAP 14 (February 2000)

Sale and leaback transactions

54. A sale and leaback transaction involves the sale of an ast by the vendor and the leasing of the

same ast back to the vendor. The lea payment and the sale price are usually interdependent

as they are negotiated as a package. The accounting treatment of a sale and leaback transaction

depends upon the type of lea involved.

If a sale and leaback transaction results in a finance lea, any excess of sales proceeds over 55.

the carrying amount should not be immediately recognid as income in the financial

statements of a ller-le. Instead, it should be deferred and amortid over the lea term.

If the leaback is a finance lea, the transaction is a means whereby the lessor provides finance 56.

to the le, with the ast as curity. For this reason it is not appropriate to regard an excess of

sales proceeds over the carrying amount as income. Such excess, is deferred and amortid over

the lea term.

If a sale and leaback transaction results in an operating lea, and it is clear that the 57.

transaction is established at fair value, any profit or loss should be recognid immediately. If

the sale price is below fair value, any profit or loss should be recognid immediately except

that, if the loss is compensated by future lea payments at below market price, it should be

deferred and amortid in proportion to the lea payments over the period for which the ast

is expected to be ud. If the sale price is above fair value, the excess over fair value should be

deferred and amortisd over the period for which the ast is expected to be ud.

If the leaback is an operating lea, and the lea payments and the sale price are established at 58.

fair value, there has in effect been a normal sale transaction and any profit or loss is recognid

immediately.

For operating leas, if the fair value at the time of a sale and leaback transaction is less 59.

than the carrying amount of the ast, a loss equal to the amount of the difference between the

carrying amount and fair value should be recognid immediately.

For finance leas, no such adjustment is necessary unless there has been an impairment in value, 60.

in which ca the carrying amount is reduced to recoverable amount in accordance with

paragraphs 55 to 59 of SSAP 17 that deal with impairment of asts.

Disclosure requirements for les and lessors apply equally to sale and leaback transactions. 61.

The required description of the significant leasing arrangements leads to disclosure of unique or

unusual provisions of the agreement or terms of the sale and leaback transactions.

Sale and leaback transactions may meet the parate disclosure criteria in paragraph 15 of 62.

SSAP 2 "Net profit or loss for the period, fundamental errors and changes in accounting

policies".

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SSAP 14 (February 2000)

Transitional provisions

63. Retrospective application of this Statement is encouraged but not required. If the Statement is

not applied retrospectively, the balance of any pre-existing finance lea is deemed to have

been properly determined by the lessor and should be accounted for thereafter in accordance

with the provisions of this Statement.

Effective date

64. The accounting practices t out in this Statement should be regarded as standard in respect

of financial statements relating to periods beginning on or after 1 July 2000. If an enterpri

applies this Statement for financial statements covering periods beginning before 1 July 2000,

the enterpri should disclo the fact that it has applied this Statement instead of SSAP 14

"Accounting for leas and hire purcha contracts" issued in 1987.

This Statement superdes SSAP 14 "Accounting for leas and hire purcha contracts" issued 65.

in 1987.

Note on legal requirements in Hong Kong

66. Paragraph 13(1)(i) of the Tenth Schedule of the Companies Ordinance requires disclosure of the

"amount, if material, charged to revenue in respect of sums payable in respect of the hire of plant

and machinery", except in the financial statements of the banks and insurance companies.

Compliance with International Accounting Standard

67. This Statement takes the position that a person holding a leahold interest in land from the

Government of the Hong Kong Special Administrative Region normally receives all the risks

and rewards incident to ownership and therefore such an interest is to be accounted for in

accordance with SSAP 13 "Accounting for investment properties" or SSAP 17 "Property, plant

and equipment", as appropriate, instead of this Statement. Except for the above, compliance with

this Statement ensures compliance in all material respects with International Accounting

Standard IAS 17 (Revid 1997) "Leas".

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SSAP 14 (February 2000)

Appendix

Sale and leaback transactions that result in operating leas

The appendix is illustrative only and does not form part of the Statement. The purpo of the appendix

is to illustrate the application of the Statement to assist in clarifying its meaning.

A sale and leaback transaction that results in an operating lea may give ri to a profit or a loss, the

determination and treatment of which depends on the lead asts carrying amount, fair value and

lling price. The table below shows the requirements of the Statement in various circumstances.

Sale price established

Carrying amount equal Carrying amount less Carrying amount above

at fair value (paragraph to fair value than fair value fair value

57)

Profit

Loss

Sale price below fair

value (paragraph 57)

Profit

no profit not applicable

no loss not applicable

no profit no profit (note 1)

recogni profit

immediately

recogni profit

immediately

recogni loss recogni loss

immediately immediately

recogni loss

immediately

Loss not compensated

by future lea

payments at below

market price

(note 1)

Loss compensated by

future lea payments

defer and amorti loss defer and amorti loss (note 1)

at below market price

Sale price above fair

value (paragraph 57)

Profit

Loss

defer and amorti defer and amorti

profit profit (note 2)

no loss no loss (note 1)

defer and amorti

Note 1: The parts of the table reprent circumstances that would have been dealt with under

paragraph 59 of the Statement. Paragraph 59 requires the carrying amount of an ast

to be written down to fair value where it is subject to a sale and leaback.

Note 2: The profit would be the difference between fair value and sale price as the carrying

amount would have been written down to fair value in accordance with paragraph 59.

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