Sale type leasing: An agreement created between the lessor and the lessee for an amount higher than the cost of the asset leased is termed sale type lease. In this type of lease the amount payable for lease includes the profit which the lessor wishes to include. The agreement should end with the transfer of ownership and the lease tenure should be at least 75% of the life of the leased asset. In addition to the above criteria the following two conditions should be satisfied compulsorily. They are: the payment which are payable for the lease should be predictable and reasonable and the concept of reimbursement of cost should not be encouraged. To determine the method of recognizing the sale type leasing revenues.

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Chapter 21, Problem 13Q

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Sale type leasing: An agreement created between the lessor and the lessee for an amount higher than the cost of the asset leased is termed sale type lease. In this type of lease the amount payable for lease includes the profit which the lessor wishes to include. The agreement should end with the transfer of ownership and the lease tenure should be at least 75% of the life of the leased asset.

In addition to the above criteria the following two conditions should be satisfied compulsorily. They are: the payment which are payable for the lease should be predictable and reasonable and the concept of reimbursement of cost should not be encouraged.

To determine the method of recognizing the sale type leasing revenues.

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