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Selling an asset and leasing it back so the seller can continue using it.
The parties negotiate the sale price, rent, lease duration, renewal rights and other obligations together. Under IFRS accounting, a qualifying sale and leaseback is not simply an unrestricted sale gain followed by rent expense: the retained right to use the asset and the lease obligation must be accounted for. If the transfer does not qualify as a sale, it is treated differently, generally as financing.
Imagine a business selling a warehouse for J$100 million and leasing it back for ten years at an agreed annual payment. It can use the proceeds to repay J$70 million of debt and retains J$30 million before fees and tax. It still owes the future lease payments and no longer owns the warehouse. This hypothetical shows the cash movement, not a calculation of the accounting gain.
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