ACCA SBR December 2026: IFRS 16 Sale and Leaseback — Why You Can't Book the Full Gain
Sale and leaseback in SBR: the seller-lessee only recognises the gain on the rights it has actually given up, and the right-of-use asset is a proportion of the old carrying amount, not the fair value. Book the full gain and you lose the marks.
What the examiners keep seeing
Sale and leaseback sits in the IFRS 16 section of the SBR syllabus and turns up as a part of the Section B questions and in the longer Section A scenarios. The pattern is consistent: candidates know a sale and leaseback is "a sale plus a lease", so they derecognise the asset, book the full profit, and then recognise a right-of-use asset at the lease liability. It looks tidy. It is wrong.
The first gate is IFRS 15. Before any IFRS 16 accounting, you must decide whether the transfer is a sale at all. If the buyer-lessor does not obtain control (for example, there is a repurchase option at a fixed price), it is not a sale. The seller keeps the asset on its statement of financial position and treats the cash received as a financial liability under IFRS 9. Candidates who skip this step cannot score the conclusion marks, however good their numbers are.
If it is a sale, IFRS 16 requires the seller-lessee to measure the right-of-use asset at the proportion of the previous carrying amount that relates to the right of use retained. The gain recognised is limited to the proportion that relates to the rights transferred to the buyer. The retained rights are not a profit.
Finally, watch the price. If the sale price is not at fair value, adjust: a below-market price is a prepayment of lease payments, an above-market price is additional financing from the buyer-lessor. Questions love to set the price at a figure that is not the fair value.
Worked example
An entity sells a building with a carrying amount of $800,000 for its fair value of $1,000,000 and leases it back. The present value of the lease payments is $400,000. The transfer satisfies IFRS 15 as a sale.
Wrong answer: Dr Cash 1,000,000; Cr Building 800,000; Cr Profit 200,000. Then Dr Right-of-use asset 400,000; Cr Lease liability 400,000. The full $200,000 gain is in profit or loss. This overstates profit.
Correct answer:
Right-of-use asset = 800,000 x 400,000 / 1,000,000 = $320,000.
Gain on rights transferred = 200,000 x (1,000,000 - 400,000) / 1,000,000 = $120,000.
Dr Cash 1,000,000; Dr Right-of-use asset 320,000; Cr Building 800,000; Cr Lease liability 400,000; Cr Gain 120,000. The entries balance at 1,320,000 each side, and the other $80,000 of gain is effectively held back in the lower right-of-use asset.
What to do
1. Write the IFRS 15 conclusion first. One sentence on control, then the accounting. If the control test fails, stop and treat it as a financing arrangement.
2. Use the proportion method every time. Right-of-use asset = carrying amount x (PV of lease payments / fair value). Gain = total gain x (1 - that same fraction).
3. Check the price against fair value. If they differ, adjust for the prepayment or additional financing before you do the proportion working.
The bottom line
SBR is a Strategic Professional paper where the pass rate has historically sat well below the Applied Skills papers, and a lot of marks are lost on rules the candidate half-remembers. Sale and leaseback is a rule you can nail in an afternoon.
Gain on the rights you gave up. Nothing on the rights you kept.