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Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term, and Initial Direct Costs of Direct Financing Leases FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Gu

By Leaseback Transaction

Abstract

Company A (seller-lessee) enters into a real estate sale-leaseback transaction with unrelated Company B (buyer-lessor). Company B requires Company A to provide an irrevocable letter of credit securing all or a portion of the lease payments as required under the lease agreement. The issuer of the letter of credit does not require Company A to pledge specific assets as collateral. The transaction otherwise qualifies for sale-leaseback accounting under Statement 98. The issue is whether Company A's uncollateralized, irrevocable letter of credit is a form of continuing involvement that precludes sale-leaseback accounting under Statement 98. EITF DISCUSSION The Task Force reached a consensus that an uncollateralized, irrevocable letter of credit is not a form of continuing involvement that precludes sale-leaseback accounting under Statement 98. [Note: See STATUS section.] The Task Force noted that the continuing involvement provisions of Statement 98 do not preclude a lessee from providing an independent third-party guarantee of the lease payments in a sale-leaseback transaction. However, the Task Force noted that all written contracts that exist between the seller-lessee in a sale-leaseback transaction and the issuer Copyright © 1991, Financial Accounting Standards Boar

Year: 1991
OAI identifier: oai:CiteSeerX.psu:10.1.1.353.4210
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