Sale and lease back Chapter See also MGDD Part VI.2

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Presentation transcript:

Sale and lease back Chapter 11.13 See also MGDD Part VI.2 GFS course ch.13.5.8 16/07/2019 Sale and lease back Chapter 11.13 See also MGDD Part VI.2

Chapter 11.13: Sale and lease back GFS course ch.13.5.8 Sale and lease back Definition: Government sells an asset; Leases it back. Why? To receive cash; More efficient / better management. Chapter 11.13: Sale and lease back

Chapter 11.13: Sale and lease back GFS course ch.13.5.8 Sale and lease back Definition: Government sells an asset; Government leases it back from the buyer. Form of lease: Is it a sale? If so, financial or operating lease? Chapter 11.13: Sale and lease back

Chapter 11.13: Sale and lease back GFS course ch.13.5.8 Sale and lease back First classify the purchasing unit: Three cases: New entity created by government; Existing public corporation; Private sector entity. Chapter 11.13: Sale and lease back

Chapter 11.13: Sale and lease back GFS course ch.13.5.8 Sale and lease back New entity created by government Unit provides only auxiliary services to government: No unit, merge with ‘parent’ unit; nothing to be recorded; Chapter 11.13: Sale and lease back

Chapter 11.13: Sale and lease back GFS course ch.13.5.8 Sale and lease back Existing public entity, 1 Services align with existing activities; Scale of the transaction adequate with entity; and Entity finances the transaction itself. GFCF with the company Impact on government B.9 Chapter 11.13: Sale and lease back

Sale and lease back Existing public entity 2 GFS course ch.13.5.8 Sale and lease back Existing public entity 2 If previous conditions are not fulfilled: Transfer of asset is ‘other change’ GG & entity; Unit borrows: transaction in F.4 & F.2 ; Payment: capital withdrawal: F.5 & F.2 ‘Restructuring’ has no impact on B.9 Chapter 11.13: Sale and lease back

Chapter 11.13: Sale and lease back GFS course ch.13.5.8 Sale and lease back Private sector entity Assess the unit and conditions in the contract Recording: Operating lease: record sale of fixed assets and then rental Financial lease: no sale, assets remain on govt balance sheet Chapter 11.13: Sale and lease back