Exposure Draft

Proposed Standard on Sales Verification and Adjustment of Sales

The IAAO Board of Directors has approved the exposure for membership comment on a proposed change in Section 5.9 of the Standard on Sales Verification and Adjustment of Sales.

Members may review the following existing copy and the draft version of the revised section (impacted area in bold and red) below and submit comments on the proposed document via IAAO Connect or by email at mead@iaao.org. The comment period runs through May 25, 2019.

Existing Standard

5.9 Leasebacks

A leaseback is defined as the sale of a building, land, or other property to a buyer under special arrangements for simultaneously leasing it on a long-term basis to the original seller, usually with an option to renew the lease. These transactions are also referred to as sale and leaseback and sale-leaseback. Leasebacks occur in the commercial and industrial class of property. Sales involving leasebacks are generally invalid because the sale price is unlikely to represent the market value of the property. This can be determined only by further verification of the sale (see Appendix B for questions involving leasebacks). Typically, the land and location is purchased, the building erected, and the property sold with a long-term leaseback clause. A major benefit of the leaseback is cash-flow issues.

Proposed Change

5.9 Leasebacks

A leaseback is defined as the sale of a building, land, or other property to a buyer under special arrangements for simultaneously leasing it on a long-term basis to the original seller, usually with an option to renew the lease. These transactions are also referred to as sale and leaseback and sale-leaseback. Leasebacks occur in the commercial and industrial class of property. Sales involving leasebacks should be analyzed to ensure that they are market transactions. This can be determined only by further verification of the sale (see Appendix B for questions involving leasebacks). Typically, the land and location is purchased, the building erected, and the property sold with a long-term leaseback clause. A major benefit of the leaseback is cash-flow issues.

 
Posted April 25, 2019