ASC

ASC 840-40

Sale-Leaseback Transactions

840 Leases

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In brief

IntermediateLeasesTransition and effective datesRecognitionDerecognition

ASC 840-40 was the legacy sale-leaseback guidance under the old lease model, addressing when a seller-lessee could recognize a sale of property it simultaneously leased back and how any gain or loss was deferred and amortized. Every substantive paragraph in the subtopic (Sections 05, 15, 25, 30, 35, 50, and 55) has been superseded by ASU 2016-02, so the subtopic now contains no operative guidance. Sale-leaseback transactions are instead accounted for under ASC 842-40, which conditions sale recognition on satisfying the transfer-of-control requirements in ASC 606.

Key points (6)
  • All paragraphs of 840-40 — including 840-40-25-1 through 25-18 (recognition), 30-2 through 30-6 (initial measurement), 35-1 through 35-4 (subsequent measurement), and 50-1 through 50-2 (disclosure) — are marked 'Paragraph superseded by Accounting Standards Update No. 2016-02.'
  • A few paragraph numbers (840-40-05-4, 05-6, 05-11, 25-6, 25-7, 30-1, 30-4) are shown as 'Paragraph not used' and never contained guidance.
  • Because 840-40 is fully superseded, entities within the scope of ASC 842 apply ASC 842-40 to sale-leaseback transactions rather than any guidance in this subtopic.
  • The legacy 840-40 framework (now withdrawn) turned on whether the seller-lessee retained more than a minor continuing involvement in the asset, generally requiring deferral and amortization of any sale gain over the leaseback term; that continuing-involvement and gain-deferral model no longer exists under 842-40.
  • Under the successor guidance, a sale is recognized only if the transfer qualifies as a sale under ASC 606 revenue recognition (transfer of control) and the leaseback is not a finance lease for the seller-lessee.
  • 840-40 remains in the Codification only as a historical marker; it may still be relevant for understanding transition and comparative-period reporting under ASU 2016-02's transition provisions.

For students. Do not study 840-40 as live rules — every paragraph was superseded by ASU 2016-02, and current sale-leaseback questions are answered by ASC 842-40 (with the sale test in ASC 606). The common mistake is applying the old 'minor continuing involvement' test and gain-deferral mechanics, which no longer apply.

sale-leaseback transactionseller-lesseebuyer-lessorsuperseded guidancecontinuing involvementdeferred gain on saletransfer of controllease standard transition

Machine-generated study aid for ASC 840-40. Check the source paragraphs below.

840-40-00Status

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840-40-00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Active Use of the PropertySupersededAccounting Standards Update No. 2016-0202/25/2016
Bargain Purchase OptionSupersededAccounting Standards Update No. 2016-0202/25/2016
Bargain Renewal OptionSupersededAccounting Standards Update No. 2016-0202/25/2016
Capital LeaseSupersededAccounting Standards Update No. 2016-0202/25/2016
Direct Financing LeaseAmendedAccounting Standards Update No. 2021-0507/19/2021
Indirectly Related to the Leased PropertySupersededAccounting Standards Update No. 2016-0202/25/2016
LeaseSupersededAccounting Standards Update No. 2016-0202/25/2016
Lease InceptionSupersededAccounting Standards Update No. 2016-0202/25/2016
Lease TermSupersededAccounting Standards Update No. 2016-0202/25/2016
MinorSupersededAccounting Standards Update No. 2016-0202/25/2016
Noncancelable Lease TermSupersededAccounting Standards Update No. 2016-0202/25/2016
Nonrecourse FinancingSupersededAccounting Standards Update No. 2016-0202/25/2016
Normal LeasebackSupersededAccounting Standards Update No. 2016-0202/25/2016
Operating LeaseSupersededAccounting Standards Update No. 2016-0202/25/2016
PenaltySupersededAccounting Standards Update No. 2016-0202/25/2016
Profit or Loss on SaleSupersededAccounting Standards Update No. 2016-0202/25/2016
Property Improvements or Integral EquipmentSupersededAccounting Standards Update No. 2016-0202/25/2016
Reasonably PossibleSupersededAccounting Standards Update No. 2016-0202/25/2016
RemoteSupersededAccounting Standards Update No. 2016-0202/25/2016
Sale-Leaseback AccountingSupersededAccounting Standards Update No. 2016-0202/25/2016
Sales RecognitionSupersededAccounting Standards Update No. 2016-0202/25/2016
Sales-Type LeaseAmendedAccounting Standards Update No. 2021-0507/19/2021
SubleaseSupersededAccounting Standards Update No. 2016-0202/25/2016
Substantially AllSupersededAccounting Standards Update No. 2016-0202/25/2016
Wrap Lease TransactionSupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-05-1 through 05-3
SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-05-5SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-05-7 through 05-10
SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-15-1 through 15-10
SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-25-1 through 25-5
SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-25-8 through 25-18
SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-30-2SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-30-3SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-30-5SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-30-6SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-35-1 through 35-4
SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-50-1SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-50-2SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-55-1 through 55-94
SupersededAccounting Standards Update No. 2016-0202/25/2016
840-40-55-82 through 55-84
AmendedAccounting Standards Update No. 2012-0410/01/2012

840-40-05Overview and Background

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Lessees

Lessors

Real Estate

840-40-15Scope and Scope Exceptions

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Lessees

Lessors

Real Estate

840-40-25Recognition

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Lessees

Lessors

Real Estate

840-40-30Initial Measurement

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Lessees

840-40-35Subsequent Measurement

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Lessees

840-40-50Disclosure

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Lessees

Real Estate

840-40-55Implementation Guidance and Illustrations

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Lessees

840-40-S00StatusSEC

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840-40-S00-1
The following table identifies the changes made to this Subtopic.
ParagraphActionCodification UpdateDate
840-40-S55-1 through S55-3
SupersededAccounting Standards Update No. 2017-1309/29/2017
840-40-S99-1 through S99-3
SupersededAccounting Standards Update No. 2017-1309/29/2017

840-40-S55Implementation Guidance and IllustrationsSEC

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840-40-S99SEC MaterialsSEC

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Related subtopics