Honey the Hamster

Investors are also increasingly trying to invest in non-agricultural assets in Australia as part of that investor`s production chain: a sale-leaseback structure can also be applied to non-farmland such as water rights, logistics and commodity trading. Sale-leasebacks should be considered on a case-by-case basis and the requirements of each transaction should vary, but any owner and investor contemplating a sale-leaseback transaction should consider carefully: finally, as another complication in calculating the tenant`s capital gain or loss, it should be remembered that a seller-lessee does not control the entire asset to the buyer-lessor. because it continues to control the same asset during the sale-leaseback period. The seller-tenant does not lose control of the asset until the sale-leaseback period has expired. There is uncertainty about the Ifrs rules that a seller/lessee should consider when determining the fair value of an asset that is the subject of a sale-leaseback transaction. On a smaller scale, the Flight Centre unloaded its headquarters on St Kilda Road (Melbourne) for $62.15 million and leased 75% of the building, while RMIT University is selling its 14-storey Bourke Street Tower (Melbourne) for $120 million over a five-year lease period. Sale-leasebacks are more common in industrial real estate markets than in offices, as many properties are unique and suitable for a particular type of transaction. In other words, industrial-style businesses are married to their properties, and properties can`t be replaced with a generic space like offices usually can. In addition, many industrial companies own their real estate, as the price is lower than that of large commercial office buildings. As a general rule, sale-leasebacks are arranged over long-term rental periods.

The jewel in the crown is the hedging of assets with a triple net lease covenant. Typically, tenants are responsible for the maintenance, repair, and services of a property such as the supply of electricity and water. However, with a triple net lease, the tenant is also responsible for investing in the property. While IFRS 13 For the measurement of fair value is generally the standard that provides guidance on fair value, IFRS 13.6(b) includes leases recognised in accordance with IFRS 16. Fair value is defined in IFRS 16 itself, but the definition of fair value in IFRS 16, which is different from the definition of fair value in IFRS 13, is called “for the purposes of applying the lessor`s accounting standards in this standard.” Insider. As a result, it is not clear what definition of fair value a seller/lessee should apply when applying the IFRS 16 sale-leaseback guidelines. Sale-leaseback transactions allow the seller-tenant to release the funds associated with the ownership of an asset while being able to take advantage of that asset. For this reason, sale-leaseback transactions are common in a number of industries. If the selling side of the transaction is considered a sale under IFRS 15, it is necessary to verify that the sale price specified in the contract corresponds to the fair value of the asset. Seller-lessees must therefore determine the fair value of the asset to ensure that they recognize the correct gain or loss of the sale (as well as the buyer-lessor for the purpose of accounting for the cost of the asset), rather than assuming that the fair value of the asset is the contract sale price indicated. Closing a sale-leaseback transaction allows the seller-lessee to immediately receive money from the buyer-lessor of the sale of the asset while retaining the right to use the asset. If the fair value of the asset is greater than its carrying amount, the completion of a sale-leaseback transaction may result in the seller-lessee recording of an undistributed profit.

IFRS 16 requires that the result on the sale side of the transaction be determined from the perspective of the seller-lessee (and the initial valuation of the acquired asset from the perspective of the buyer-lessor) by reference to the fair value of the asset and not to the contractual sale price indicated. In a sale-leaseback transaction, one company (the seller-tenant) sells an asset to another company (the buyer-lessor), which then leases it to the seller-lessee. In short, it seems that the increasing prevalence of sale-leaseback is a victory: a profit for operators and investors and could be the right strategy to allow a company to grow in the current COVID-restrictive environment. The recognition of a sale-leaseback transaction under IFRS 16 Leases differs significantly from the recognition of a sale-leaseback transaction under IAS 17 Leases. If it is determined that the fair value of the asset is less than or greater than the contract selling price, the difference is recognised by the lessee as an additional loan or advance payment. Similarly, the lessor takes into account the difference in the form of rental claims or rental claims. deferred rental income (if the lease is classified as an operating lease) or as an adjustment by the finance lease debtor (if the lease is classified as a finance lease). This is illustrated in the following table: Accounting for sale-leaseback transactions has become more complex under IFRS 16. To enable a smooth transition to IFRS 16, finance teams should identify sale-leaseback transactions that are still in effect when IFRS 16 is applied to ensure that they are properly accounted for during the transition process and after application.

In the case of a transaction on market terms, it is very likely that the full consideration for the sale and relocation will be made on market terms. However, this does not preclude the consideration received from the sale side of the contract from being by mutual agreement, with otc lease compensation payments being made on the sale-leaseback side of the transaction. From the seller/tenant`s perspective, a sale-leaseback agreement can offer the following: as business interest in agricultural investment increases, there are new sales and sale-leaseback opportunities in the Australian agricultural industry. Attracting and adopting investment alleviates the usual constraints on agricultural capital, allows for investment in infrastructure and improves supply chains, maximising Australia`s international competitiveness. Industry trends such as increasing corporateization, aggregate land ownership, and institutional investment should come as no surprise to investors looking for higher returns on investments deemed “safe.” The sale-leaseback of real estate assets is an ingenious way to free up money to allow a business to grow. A sale-leaseback transaction occurs when a business that owns the property it inhabits sells the property to an investor, but then leases it, usually on a long-term basis. This process is an emerging trend among national operators who have multiple premises or unique functional properties. In some cases, when determining the gain or loss on the sale of the asset, it may be easier to compare contractual sale-leaseback rents with market rents (not the contract sale price with the fair value of the leased asset), and IFRS 16 allows for this approach. For example, arnott`s owners, KKR, sold its $800 million real estate portfolio on terms of sale and sale-leaseback of up to 30 years. .