3.3 Management of Capital Invested in Assets 37was not a sale at all, but rather a secured financing arrangement that was not prop-
erly perfected.
In some jurisdictions, a sale and lease-back transaction is more easily regarded
as an assignment by way of security that does not create security rights enforce-
able against third parties.
For example, in Switzerland, the transfer of ownership of movables under a two-party sale
and lease-back contract is not enforceable in the insolvency of a Swiss lessee against the
lessee’s creditors and other third parties, where the leased movables were in the possession
of the seller/lessee before the conclusion of the contract.^63 The buyer/lessor is not regarded
as the owner of the leased assets, because the parties must not evade legal rules on security
interests in movables.^64 In Germany, the rules on assignment by way of security are less
strict than in Switzerland.^65
Validity and enforceability of core clauses. For operational reasons, the firm
should ensure that the expiry of the lease will not prevent it from using the asset.
The sale and lease-back contract usually provides that the seller/lessee has the
right or option to purchase the asset at the expiry of the lease period.^66
That clause is legally relevant even in other respects. (a) If the parties have
agreed on the repurchase of the asset in such a way that the buyer/lessor has no
market risk, the sale will often be recharacterised as an assignment by way of se-
curity rather than as a “true sale”. This may make the transfer of proprietary rights
to the buyer/lessor unenforceable against third parties. (b) Furthermore, the ac-
counting treatment of the transaction may depend on to what extent market risk
has been transferred to the buyer/lessor.
Accounting. The accounting treatment of sale and lease-back depends on the
applicable accounting rules. There can be differences between IFRS and national
accounting rules.
Sale and lease-back transactions are specifically within the scope of IAS 17 and SIC-27.
Leases are classified as finance or operating, based on the extent to which the lessor has
transferred or the lessee has obtained “substantially all” risks and rewards incident to the
ownership of the leased asset.
The accounting treatment for sale and lease-back transactions depends on the circum-
stances of the transaction and the lease classification. For example, where the transaction
involves the lessor providing finance to the lessee, with the asset as security, it is not ap-
propriate for the seller/lessee to regard an excess of sale proceeds over the carrying amount
of the asset as a gain at the time of the transaction.
(^63) BGE 119 II 236; Frick J, Finanzleasinggeschäfte am Beispiel von Aircraft Finance-
Transaktionen - Strukturen, Vorteile und Risiken, SZW/RSDA 5/2000 pp 248–249.
(^64) Art. 717(1) ZBG and Art. 884(3) ZGB.
(^65) § 929 BGB and § 930 BGB.
(^66) See Habib MA, Johnsen DB, The Financing and Redeployment of Specific Assets, J Fin
54 (1999) pp 693–720 at p 703. See also Werner HS, Eigenkapital-Finanzierung. Bank-
Verlag, Köln (2006) pp 199–200: “In der Regel wird auch eine Rückkaufoption verein-
bart, die bei Immobilien grundbuchrechtlich durch eine Auflassungsvormerkung abgesi-
chert werden kann. Durch ein vereinbartes Rückkaufsrecht hält sich das Unternehmen
die Möglichkeit offen, das veräußerte Wirtschaftsgut in der Zukunft zurückzuerwerben.”