What is sales and leaseback in accounting?

A sale and leaseback transaction occurs when the seller transfers an asset to the buyer, and then leases the asset from the buyer. When such a transaction occurs, the first accounting step is to determine whether the transaction was at fair value.Click to see full answer. In this regard, why would you do a sale leaseback?In the conventional sale-leaseback, a corporation sells the real estate it owns outright, then leases all or a portion of it back from the investor, thereby freeing most or all of the capital. One of the single biggest reasons why a company undertakes a sale-leaseback is to gain off-balance-sheet financing. what is the advantage of sale and leaseback? The main advantages of sale and leaseback are that it enables businesses to release cash from existing items of value such as equipment, plant and machinery. The cash gained can be used for many purposes including business acquisitions or simply providing extra working capital. Subsequently, question is, what is meant by sale and leaseback? Leaseback, short for “sale-and-leaseback”, is a financial transaction in which one sells an asset and leases it back for the long term; therefore, one continues to be able to use the asset but no longer owns it.What is a sales type lease?Sales-type is a type of capital lease where the present value of minimum lease payments i.e. the lease receivable for a lessor is higher than the carrying amount of the leased asset. It can be contrasted by the direct financing lease in which there is no operating profit recognized at the inception of the lease.