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In sale and leaseback, what is the logic(general) behind the amortisation of profits / loss ,as the case may be


Swathi Krishna

Swathi Krishna

CA Inter

7K+

28-Sep-20 01:07

52

Answers (1)

Sale and lease back is a structured transaction. I can sell the asset at a higher profit (above its fair value) and take it back on lease at a higher rental. Because i sold at a higher price, i will show higher profits. But the reality is that i will pay higher rent in future. So to ensure that profit and losses are reported properly, amortisation is done.


Suraj Lakhotia

Suraj Lakhotia

Admin

28-Sep-20 06:49

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