Under the Provisions of ASC 842 Sale‐leaseback Accounting Is Virtually

question 40

Multiple Choice

Under the provisions of ASC 842 sale‐leaseback accounting is virtually eliminated as an off‐balance sheet financing proposition, because both the seller‐lessee and a buyer‐lessor will apply the provisions of FASB ASC 602 Revenue Recognition to determine whether a sale has occurred. Accordingly, which of the following is not a criterion that must be met to record a sale-leaseback a sale?

• A) The transaction meets the sale guidance in the new revenue recognition standard.
• B) The transaction is a leveraged lease
• C) The leaseback is not a finance or a sales‐type lease
• D) If there is a repurchase option, the exercise price is at the asset's fair value at the time of exercise, and alternative assets that are substantially the same as the transferred asset are readily available in the marketplace.

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Definitions:

Fair Value Measurement

Fair value measurement is the process of estimating the price at which an asset or liability could be exchanged in an orderly transaction between market participants at the measurement date.

Valuation Techniques

Methods applied to estimate the fair value of assets and liabilities, which can include market, income, and cost approaches.

Service Capacity

The total amount of service activity or output that a company can provide in a given period based on its current resources.