Sale and Leaseback

A sale and leaseback (also called asset refinance) is a transaction in which a business sells an asset it owns outright to a finance provider and simultaneously enters into a lease agreement to continue using the asset. The business receives a cash lump sum equal to the agreed sale price and makes monthly lease payments to the finance provider thereafter.

Sale and leaseback is used by businesses to unlock equity tied up in owned assets without disrupting operations. It is particularly common for commercial property, vehicles, plant, and machinery. The proceeds can be used for any purpose: working capital, debt repayment, investment, or expansion.

The accounting treatment of a sale and leaseback under IFRS 16 requires careful consideration - depending on whether the transaction qualifies as a genuine sale under IFRS 15, the asset may need to remain on the balance sheet. Consult your accountant before entering into a sale and leaseback arrangement.

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