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
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