Which of the following statements is notcorrect for sale-and-leaseback transactions under the new ASC 842...

Which of the following statements is notcorrect for sale-and-leaseback transactions under the new ASC 842 accounting guidance for leases?

Multiple Choice

If control of the asset has not been given up, the transaction is not a sale.
If the seller-lessee has the option to repurchase the asset at less than fair value of the asset at time of exercise, the transaction is not treated as a sale.
The changes in ASC 842 give seller-lessees less incentive to enter into sale-and-leaseback transactions.
Seller-lessees have higher motivation to enter into a finance lease under ASC 842 than they did under ASC 840.

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Expert Solution

Answer : Seller-lessees have higher motivation to enter into a finance lease under ASC 842 than they did under ASC 840.

There is nothing such motivation under ASC 842 which promotes or gives higher motivation to enter into finance lease than ASC 840

It is right as per new ASC 842 for a transaction to be sale it must transfer the control of assets

As per new ASC if agreement has repurchase option it will not be treated as sale.

ekkarill92 answered 1 year ago

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