# ASC 842-40-30: Leases — Sale and Leaseback Transactions — 30 Initial Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/842/40/#30-initial-measurement) 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): 2026-09-10T01:57:48.887Z to 2026-09-10T01:57:48.887Z Record version: sha256:7431503c4b832d7131977e41a8e23617bbc44d50ba630ce15d657e937a619b90 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 842-40-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/842/40/#30-initial-measurement) SEC content: no #### Transfer of the Asset Is a Sale ##### [842-40-30-1](https://asc.understandingaccounting.org/asc/842/40/#842-40-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:48.887Z to 2026-09-10T01:57:48.887Z Record version: sha256:95701c557e78c519952b8cb52eaa4d9df4f02e0590225fb083c7baa16e640f21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall determine whether a sale and leaseback transaction is at [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.") on the basis of the difference between either of the following, whichever is more readily determinable: 1. a The sale price of the asset and the fair value of the asset 2. b The present value of the [lease payments](https://asc.understandingaccounting.org/glossary/l/#lease-payments "See paragraph 842-10-30-5 for what constitutes lease payments from the perspective of a lessee and a lessor.") and the present value of market rental payments. ##### [842-40-30-2](https://asc.understandingaccounting.org/asc/842/40/#842-40-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:48.887Z to 2026-09-10T01:57:48.887Z Record version: sha256:05fb83c8cc29a954dc411898315e818aa987e552d3f8e744cdf1be1ba4977bd8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the sale and leaseback transaction is not at fair value, the entity shall adjust the sale price of the asset on the same basis the entity used to determine that the transaction was not at fair value in accordance with paragraph [842-40-30-1](https://asc.understandingaccounting.org/asc/842/40/#842-40-30-1). The entity shall account for both of the following: 1. a Any increase to the sale price of the asset as a prepayment of rent 2. b Any reduction of the sale price of the asset as additional financing provided by the buyer-lessor to the seller-lessee. The seller-lessee and the buyer-lessor shall account for the additional financing in accordance with other Topics. ##### [842-40-30-3](https://asc.understandingaccounting.org/asc/842/40/#842-40-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:48.887Z to 2026-09-10T01:57:48.887Z Record version: sha256:0c5420ce05564a69e28ee8445114eab790e094cae79cb47ec5c6ab99da63b2a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A sale and leaseback transaction is not off market solely because the sale price or the lease payments include a variable component. In determining whether the sale and leaseback transaction is at fair value, the entity should consider those variable payments it reasonably expects to be entitled to (or to make) on the basis of all of the information (historical, current, and forecast) that is reasonably available to the entity. For a seller-lessee, this would include estimating any variable consideration to which it expects to be entitled in accordance with paragraphs [606-10-32-5 through 32-9](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-5) . ##### [842-40-30-4](https://asc.understandingaccounting.org/asc/842/40/#842-40-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:48.887Z to 2026-09-10T01:57:48.887Z Record version: sha256:79daf7bcd439154e4ef242d483a4bd45c36f77c52cb605588bf556baefab987b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the transaction is a related party [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."), an entity shall not make the adjustments required in paragraph [842-40-30-2](https://asc.understandingaccounting.org/asc/842/40/#842-40-30-2), but shall provide the required disclosures as discussed in paragraphs [842-20-50-7](https://asc.understandingaccounting.org/asc/842/20/#842-20-50-7) and [842-30-50-4](https://asc.understandingaccounting.org/asc/842/30/#842-30-50-4). ##### [842-40-30-5](https://asc.understandingaccounting.org/asc/842/40/#842-40-30-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:48.887Z to 2026-09-10T01:57:48.887Z Record version: sha256:35ed03e1bddbf8f3f260bb89c96cc0d0b07a77304c29484499f369b0dacde2c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Examples 1 and 2 (paragraphs [842-40-55-22 through 55-38](https://asc.understandingaccounting.org/asc/842/40/#842-40-55-22) ) for illustrations of the requirements for a sale and leaseback transaction. #### Transfer of the Asset Is Not a Sale ##### [842-40-30-6](https://asc.understandingaccounting.org/asc/842/40/#842-40-30-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:57:48.887Z to 2026-09-10T01:57:48.887Z Record version: sha256:52e1f5d9148071eb2403222ac9be62db3afcf6aed98e800549cef5d33d61e477 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in paragraph [842-40-25-5](https://asc.understandingaccounting.org/asc/842/40/#842-40-25-5) notwithstanding, the seller-lessee shall adjust the interest rate on its financial liability as necessary to ensure that both of the following apply: 1. a Interest on the financial liability is not greater than the payments on the financial liability over the shorter of the [lease term](https://asc.understandingaccounting.org/glossary/l/#lease-term "The noncancellable period for which a lessee has the right to use an underlying asset, together with all of the following: Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor.") and the term of the financing. The term of the financing may be shorter than the lease term because the transfer of an asset that does not qualify as a sale initially may qualify as a sale at a point in time before the end of the lease term. 2. b The carrying amount of the asset does not exceed the carrying amount of the financial liability at the earlier of the end of the lease term or the date at which control of the asset will transfer to the buyer-lessor (for example, the date at which a repurchase option expires if that date is earlier than the end of the lease term).