an excess of sales proceeds over the carrying amount as income. Such excess is deferred and amortised over the lease term.
If a sale and leaseback transaction results in an operating lease, and it is clear that the transaction is established at fair value, any profit or loss shall be recognised immediately. If the sale price is below fair value, any profit or loss shall be recognised immediately except that, if the loss is compensated for by future lease payments at below market price, it shall be deferred and amortised in proportion to the lease payments over the period for which the asset is expected to be used. If the sale price is above fair value, the excess over fair value shall be deferred and amortised over the period for which the asset is expected to be used.
If the leaseback is an operating lease, and the lease payments and the sale price are at fair value, there has in effect been a normal sale transaction and any profit or loss is recognised immediately.
For operating leases, if the fair value at the time of a sale and leaseback transaction is less than the carrying amount of the asset, a loss equal to the amount of the difference between the carrying amount and fair value shall be recognised immediately.
For finance leases, no such adjustment is necessary unless there has been an impairment in value, in which case the carrying amount is reduced to recoverable amount in accordance with IAS 36.
Disclosure requirements for lessees and lessors apply equally to sale and
leaseback transactions. The required description of material leasing
arrangements leads to disclosure of unique or unusual provisions of the agreement or terms of the sale and leaseback transactions.
Sale and leaseback transactions may trigger the separate disclosure criteria in
IAS 1 Presentation of Financial Statements.
Subject to paragraph 68, retrospective application of this Standard is
encouraged but not required. If the Standard is not applied
retrospectively, the balance of any pre-existing finance lease is deemed to have been properly determined by the lessor and shall be accounted for thereafter in accordance with the provisions of this Standard.
An entity that has previously applied IAS 17 (revised 1997) shall apply the amendments made by this Standard retrospectively for all leases or, if IAS 17 (revised 1997) was not applied retrospectively, for all leases entered into since it first applied that Standard.
An entity shall reassess the classification of land elements of unexpired leases at the date it adopts the amendments referred to in paragraph 69A on the basis of information existing at the inception of those leases. It shall recognise a lease newly classified as a finance lease retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors. However, if an entity does not have the
information necessary to apply the amendments retrospectively, it shall:
apply the amendments to those leases on the basis of the facts and
circumstances existing on the date it adopts the amendments; and
recognise the asset and liability related to a land lease newly
classified as a finance lease at their fair values on that date; any difference between those fair values is recognised in retained earnings.
An entity shall apply this Standard for annual periods beginning on or after
1 January 2005. Earlier application is encouraged. If an entity applies this Standard for a period beginning before 1 January 2005, it shall disclose that fact.
Paragraphs 14 and 15 were deleted, and paragraphs 15A and 68A were added as part of Improvements to IFRSs issued in April 2009. An entity shall apply those
amendments for annual periods beginning on or after 1 January 2010. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact.
Withdrawal of IAS 17 (revised 1997)
This Standard supersedes IAS 17 Leases (revised in 1997).
Amendments to other pronouncements
The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period.
The amendments contained in this appendix when this Standard was issued in 2003 have been incorporated into the relevant IFRSs published in this volume