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

2. Chapter 11.13: Sale and lease back
GFS course ch
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

3. Chapter 11.13: Sale and lease back
GFS course ch
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

4. Chapter 11.13: Sale and lease back
GFS course ch
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

5. Chapter 11.13: Sale and lease back
GFS course ch
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

6. Chapter 11.13: Sale and lease back
GFS course ch
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

7. Sale and lease back Existing public entity 2
GFS course ch
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 & F.2
‘Restructuring’ has no impact on B.9
Chapter 11.13: Sale and lease back

8. Chapter 11.13: Sale and lease back
GFS course ch
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