off-market terms

Broad Transactions1

1. 842-40Sale and Leaseback Transactions842 Leases

   ASC 842-40 governs sale and leaseback transactions, in which a seller-lessee transfers an asset to a buyer-lessor and leases it back. The threshold question is whether the transfer qualifies as a sale under Topic 606's control-transfer guidance; if it does, the seller-lessee derecognizes the asset, recognizes the sale at the transaction price, and accounts for the leaseback under 842-20, while the buyer-lessor accounts for the purchase under other Topics and the lease under 842-30. If the transfer is not a sale (e.g., the leaseback is a finance/sales-type lease or there is a non-fair-value repurchase option), the transaction is a failed sale accounted for as a financing by both parties.