Sale-Leaseback
Related terms
Category
ASC 842
A sale-leaseback is a transaction in which an entity sells an asset and immediately leases it back from the buyer. Under ASC 842, the transaction is only accounted for as a sale-leaseback if the transfer qualifies as a sale under ASC 606 revenue recognition guidance.
Why it matters
Sale-leasebacks are a common financing strategy, particularly for real estate. Companies sell properties to unlock capital while retaining use through a lease. Under ASC 842, the accounting is more complex than under the previous standard: the seller-lessee must first determine whether the transfer qualifies as a sale under ASC 606.
If the transfer is a sale, the seller-lessee derecognizes the asset, recognizes the lease, and records any gain or loss. If the transfer fails the sale criteria, the transaction is treated as a financing arrangement. This analysis requires coordination between revenue recognition and lease accounting expertise.
How Arvexi handles this
Arvexi supports sale-leaseback accounting with guided workflows for determining whether the transfer qualifies as a sale. The platform calculates the ROU asset, lease liability, and any gain or loss on the transaction, generating the complete set of journal entries for both the sale and leaseback components.