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Special form of a lease - sale and leaseback transaction Discussion

Author: Anonymous From: www.yourpaper.net Posted: 2007-11-19 06:54:18 Read:
Currently, the sale and leaseback transaction has become the object of study of many companies, this paper intends to analyze the basic characteristics and the nature of the sale and leaseback transactions, and to explore the fundamental drivers of sale and leaseback transaction.

The essential characteristics of a sale and leaseback transaction: asset value discrete

Leaseback is a set of sales and financing as one of the special form of the new method for companies to raise capital, usually refers to the existing assets are sold to other enterprises, and then lease back financing. It is commonly used in Western developed countries, one of the means of financing. In a sale and leaseback transaction, the lessee and the lessor has a dual identity, double-trading to form a discrete phenomenon of asset value and use value, specific performance in the following several aspects:

1, the dual nature of the business of trading. Sale and leaseback transaction both sides have the dual identity of the business, and thus with overlapping business processes. First, the assets of the seller while the lessee, the one hand, through the sale of corporate business asset sales, achieved sales revenue, leased direction the other hand, as the other leased assets used in the production process, in order to achieve the value of the assets and the exchange value economic business double identity. Second, the asset purchase while the lessor, the corporate ownership of the assets obtained through the purchase of the assets of the other units, the same time as the lessor of the asset transferred the right to use, to obtain the right to use assets transfer income to realize the asset's value in use recycling has duality on the business, financial asset sales and asset leasing as one of the special trading behavior.

2, the value of the assets transferred in-kind transfers phase separation. In the process of the sale and leaseback transactions, the sale of the transfer of ownership of the asset does not require physical asset transfer takes place, thus the seller (lessee) can uninterrupted use of the asset sale and leaseback transaction process. That the lessor as a purchaser, you just made the ownership of assets, made the risks and rewards of ownership of the goods does not, in essence, to grasp the kind of assets, resulting in a separation of in-kind transfers, and the transfer of value.

Assets morphogenetic conversion. Sale and leaseback transaction does not change the premise of the occupancy and use of the leased property, the lessee, the process of conversion of the fixed assets and similar assets to current assets, thereby enhancing the liquidity of the long-term value of the assets, to promote the inactive long-term capital flows and to improve the efficiency in the use of all funds. Thus, on the one hand, to solve the difficult problem of corporate liquidity, on the other hand make an inventory of the fixed assets, efficient use of existing assets, accelerate cash recycling to generate capital expansion effect.

4, non-real-time asset transfer income. "Accounting Standards for Enterprises - lease provisions. The seller (lessee) shall not be sold and leased back to the profit and loss is recognized as profit or loss, and should be deferred installments included in the profit or loss for the periods. Is generally believed that the asset transfer income should be included in the profit or loss at the time of the sale and leaseback transaction, the price of assets and asset rents are interrelated, and therefore, the transfer of assets of the profit and loss are amortized in subsequent accounting periods, rather than be considered as profit or loss. The purpose of doing so is to prevent the lessee to take advantage of such a transaction to achieve the purpose of manipulating profits, at the same time to avoid fluctuations in the profit or loss of each of the lessee leasing in.

Second, the sale and leaseback transaction directly Motivation: Financing

Sale and leaseback transaction form a leasing business, in essence, is a means of financing. This means of financing is not a finance lease in the pure sense, from a content perspective, can be a finance lease, it can be an operating lease. Lease payments and the sale prices are often interrelated, so the formation of a package of negotiations, but by its very nature is still financing.
Sale and leaseback transaction as a finance lease form easily people accept. Because the main aim of the finance lease financing, the assets were acquired by installments, obtain ownership of the asset at the end of the lease. The International Accounting Standards regulations, if the leaseback is a finance lease, this transaction is a lessor to provide funds to the lessee and assets as a guaranteed way. Business through the sale of assets to obtain cash to achieve the purpose of financing, while achieved through leasing the right to use of the asset, it does not affect the normal production and operation activities, financing lease companies often used by the Western developed countries. Sale and leaseback transaction is an important way to solve the lack of corporate liquidity, enterprises can achieve the purpose of financing, to increase the proportion of liquidity.
As an operating lease, the primary purpose of the sale and leaseback transaction is still financing the enterprise to achieve the purpose of financing through the sale of assets, while assets were acquired by leasing the right to use, that does not change the condition of continuous use. Here, finance lease, the lease term of the corporate assets are generally relatively short, the profit or loss on sale of assets is amortized over the expected period of use of assets. Directly reflected in the sale of links as a means of financing, general aspects of leasing is a continuation of the financing aspects of the sale and leaseback transaction forms part of the package deal.
indirect motivation

, sale and leaseback transaction: tax on financial interests

If financing leaseback transactions directly move trapped, then obtain the tax on the financial interests of the sale and leaseback transaction indirect motives, but also the lessee the most concern. Tax on financial interests depends on the how much of the profit or loss of the sale of assets, sales profit or loss on the length and deferred gains and losses deferred amortization method.
Sale and leaseback transaction is essentially a financing behavior, asset sales is a derivative of the leasing business behavior, gain or loss on the sale of assets can not be recognized as profit or loss should be deferred in future accounting periods, the lease in the future recognized during the period. Can not be confirmed due to the sale of assets of the current income and accounting income is lower than the actual revenue, reduce the taxes denominated basis, so a corresponding reduction in revenue, even if the asset transfer income in later accounting period deferred late will increase the amount of revenue, overall corporate it is favorable, and a corresponding increase in the company's financial interests. On the other hand, if the asset transfer income as a negative that is, the sale of assets to form the losses, according to the requirements of the principle of prudence, the enterprise should this loss in profit or loss, and reduce corporate profits, and a corresponding reduction in the tax, which has also made a financial interest on the tax .
Sale and leaseback transaction can obtain financial interest on the tax if the lessee sale and leaseback of land, you can get the tax on financial income. In the sale and leaseback transaction if it is a capital lease, the depreciation of the leased asset and capital lease depreciation, as implemented in the future leaseback gains and losses amortized over the period of the lease. If the sale and leaseback of land use rights, land use rights costs and the lease interest expense can still press a certain method of amortization is included in profit or loss. Well known to acquire land use rights are usually not depreciated, will not increase the cost of part of the cost, and the sale and leaseback transaction usually can justifiably cost amortization, increased the cost of the company's costs, reduce income, and a corresponding reduction in the tax to obtain a tax on financial interests.

Sale and leaseback transaction essential part: full disclosure

Sale and leaseback transaction is a special leasing business transactions, and therefore should be specifically disclosed. Different countries, regions require different accounting standards for the disclosure of the sale and leaseback transaction. The United States, the United Kingdom, China, Taiwan and Hong Kong accounting standards were not to make specific provisions on the sale and leaseback transaction disclosure. Only international accounting standards that: the lessor and the lessee of disclosure requirements also apply to the sale and lease-group transactions; same time, the International Accounting Standards No. 8 - the net profit or loss, significant errors and accounting policy changes in the separate disclosure standards suitable for on sale and leaseback transaction; specified in the instructions to make specific arrangements of the major rental business, should be disclosed in the agreement or the terms of the sale and leaseback of special and non-customary provisions.
Purposes of general business, the sale and lease back transaction business related aspects of the corporate accounting disclosure, First of all, the sale of the assets involved in the transfer of ownership of the business of the corporate assets, the transfer of corporate assets to affect the balance sheet and profit and loss statements; Second and leaseback business issues related to the enterprise managed assets and leasing fees paid, and should be fully revealed. The same time, as a special form of coarse lease, sale and lease group transactions directly affect the company's financial condition and results of operations, objective, truly reflect the economic interests of the lessee and the lessor, to protect the legitimate rights and interests of investors on the sale and leaseback The transaction should make special disclosures. Of "Accounting Standards for Business Enterprises - lease provisions: the lessee shall not recognized finance lease the balance of the financing costs, sharing not confirm the method of financing costs and significant operating lease to be disclosed; lessor unrealized finance income on finance leases the balance, sharing not fully reveal the methods and the book value of assets used in financing income, special terms in the sale and leaseback contract specifically disclosed.
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