How do we account for sale and lease-back transactions?
In case of sale of aircraft, the difference between the sale price and the book value of the aircraft is recognised as profit or loss. Such profit on sale of aircraft forms part of ’Non-operating Revenue’ in the Profit/ (Loss) Account. In case of aircraft, which is acquired through a hire-purchase agreement, the outstanding hire-purchase instalment(s) is repaid out of the sale proceeds.
There is no specific accounting impact in case of lease-back, except accounting for lease rentals as may be applicable in the Profit/(Loss) Account.