medium · Financial Accounting accounting-cycle-financial-statements
A company sells a building for $200 million (Book Value $120 million) and immediately leases it back for 15 years. The transaction qualifies as a sale under ASC 606.
How should the $80 million difference be treated in the year of the transaction?
- Recorded as a reduction to the Right-of-Use asset
- Deferred and amortized evenly over the full 15-year lease term
- Recognized instead as a liability that runs off until the lease expires
- Recognized immediately as a gain in the income statement
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