Sales and Lease back - flow through financial statements
Hi guys
Got an accounting question as I am trying to get my head around sales-lease accounting mechanics and the flow through 3FS:
Assuming: - FV of $20m - 10 years lease - Lease interest 5% - Lease payment / year 1.8m - BV 15m - D&A assuming 0.5m - PV lease liability @ 5% (via NPV formula) = 13.9m = lease liability
First question, I see two different approaches calculating RoU assets i) assuming same amount as lease liability (13.9m), or ii) calculating as PV/FV x BV ($10.4m). From a practical perspective, which methodology be used?
Instantly:
IS - Gain on sales (20-15m) = 5m -> for now I assume RoU = lease liability - Tax = assuming 0 - NI = 5.0m CF - NI = 5.0m - Gain on sales= -5m - Cash inflow =20m - C&c equiv. = 20m
BS - Cash = 20m - PPE = (15m) - RoU = 13.9m - Total asset= 18.9m /// - Lease = 13.9m - NI= 5.0m - Total lease = 18.9m
Year end IS - Interest = -0.7m (based on 5%) - D&A = -0.5m - NI = -1.2m
CF - NI = -1.2m - D&A = +0.5m - Lease = -1.8m - C&c equiv = -2.5m
BS - Cash = -2.5m - RoU = 13.4 (13.9 – 0.5m D&A) - Total asset= 10.9m /// - Lease = 12.1 (- 1.8m lease principal) - NI= -1.2m - Total lease = 10.9m
Many thanks monkeys!
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