# ASC 842-40-25: Leases — Sale and Leaseback Transactions — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/40/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:57:45.371Z to 2026-09-10T01:57:45.371Z Record version: sha256:c746684d649f1cf0ab25dc22b481823e36808cc54df9c5ed4eb9a1386b0ffa61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-40-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/842/40/#25-recognition) SEC content: no #### Determining Whether the Transfer of the Asset Is a Sale ##### [842-40-25-1](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:45.371Z to 2026-09-10T01:57:45.371Z Record version: sha256:76f67e278fa607243c521c88ac3ad3459e89d998625cb1ce794c84a4f1d68e91 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall apply the following requirements in Topic 606 on revenue from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with customers when determining whether the transfer of an asset shall be accounted for as a sale of the asset: 1. a Paragraphs [606-10-25-1 through 25-8](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-1) on the existence of a contract 2. b Paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30) on when an entity satisfies a performance obligation by transferring control of an asset. ##### [842-40-25-2](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:45.371Z to 2026-09-10T01:57:45.371Z Record version: sha256:213efa2b2e6902f668c167a4e89ebb16d99d0c48bc853c6cc567eccccf1c2eb2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The existence of a leaseback (that is, a seller-lessee's right to use the [underlying asset](https://asc.understandingaccounting.org/glossary/u/#underlying-asset "An asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The underlying asset could be a physically distinct portion of a single asset.") for a period of time) does not, in isolation, prevent the buyer-lessor from obtaining control of the asset. However, the buyer-lessor is not considered to have obtained control of the asset in accordance with the guidance on when an entity satisfies a performance obligation by transferring control of an asset in Topic 606 if the leaseback would be classified as a [finance lease](https://asc.understandingaccounting.org/glossary/f/#finance-lease "From the perspective of a lessee, a lease that meets one or more of the criteria in paragraph 842-10-25-2.") or a [sales-type lease](https://asc.understandingaccounting.org/glossary/s/#sales-type-lease "From the perspective of a lessor, a lease that meets one or more of the criteria in paragraph 842-10-25-2 and is not an operating lease in accordance with paragraph 842-10-25-3A."). ##### [842-40-25-3](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:45.371Z to 2026-09-10T01:57:45.371Z Record version: sha256:820ab1f74b3ff390ff24bb031781a77ca675b7f1bbef7f499940329a78b28ecc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An option for the seller-lessee to repurchase the asset would preclude accounting for the transfer of the asset as a sale of the asset unless both of the following criteria are met: 1. a The exercise price of the option is the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") of the asset at the time the option is exercised. 2. b There are alternative assets, substantially the same as the transferred asset, readily available in the marketplace. #### Transfer of the Asset Is a Sale ##### [842-40-25-4](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:45.371Z to 2026-09-10T01:57:45.371Z Record version: sha256:a5ff1f76476623a56dd2ca619b5817f0ff4fcf32791e60ed42fa34faacad9235 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the transfer of the asset is a sale in accordance with paragraphs [842-40-25-1 through 25-3](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-1) , both of the following apply: 1. a The seller-lessee shall: 1. 1 Recognize the transaction price for the sale at the point in time the buyer-lessor obtains control of the asset in accordance with paragraph [606-10-25-30](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-30) in accordance with the guidance on determining the transaction price in paragraphs [606-10-32-2 through 32-27](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-2) 2. 2 Derecognize the carrying amount of the [underlying asset](https://asc.understandingaccounting.org/glossary/u/#underlying-asset "An asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The underlying asset could be a physically distinct portion of a single asset.") 3. 3 Account for the [lease](https://asc.understandingaccounting.org/glossary/l/#lease "A contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.") in accordance with Subtopic 842-20. 2. b The buyer-lessor shall account for the purchase in accordance with other Topics and for the lease in accordance with Subtopic 842-30. #### Transfer of the Asset Is Not a Sale ##### [842-40-25-5](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:45.371Z to 2026-09-10T01:57:45.371Z Record version: sha256:6278c5de82b0106f1231e3f41fb8b736ddb3d87cf72cc122ee7eec21760600db Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the transfer of the asset is not a sale in accordance with paragraphs [842-40-25-1 through 25-3](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-1) , both of the following apply: 1. a The seller-lessee shall not derecognize the transferred asset and shall account for any amounts received as a financial liability in accordance with other Topics. 2. b The buyer-lessor shall not recognize the transferred asset and shall account for the amounts paid as a receivable in accordance with other Topics.