(b) Any profit related to a sale-leaseback transaction in
which the seller-lessee retains the property leased (i.e., the sellerlessee
retains substantially all of the benefits and risks of the ownership
of the property sold), shall be deferred and amortized in
proportion to the amortization of the leased asset, if a capital
lease. If it is an operating lease, the profit will be deferred in proportion
to the related gross rental charged to expense over the
lease term. It is important to note that losses, however, are
recognized immediately for either a capital or operating lease.
Since the gain on the sale should be deferred in either case, no
gain is recognized at the time of the sale.
NOTE: An example of an operating lease in which
substantially all of the remaining use of the leased asset
is retained by the lessee occurs when the lease term
begins within the last 25% of the asset’s original useful