General Studies · Corporate Financial Reporting & IBC
A corporate client approaches a bank for a Sale and Leaseback arrangement involving its existing headquarters building to unlock liquidity. If the transaction is executed at a price above the current fair value of the property, how must the 'excess' over the fair value be treated under India's financial reporting framework (Ind AS 116), and what is the status of the bank's claim if the client enters insolvency under the Insolvency and Bankruptcy Code (IBC) 2016?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1The entire proceeds are treated as a gift to the corporation, and the bank has no legal claim over the asset since it was a sale and leaseback.
- 2The excess must be recognized as deferred revenue by the client, and the bank's claim is treated as an operational debt rather than a financial debt.
- 3The excess is treated as additional financing provided by the buyer-lessor to the seller-lessee, and the bank's status depends on whether it holds a valid security interest under IBC.✓
- 4The excess is treated as a capital gain for the client, and the bank is considered a preferential creditor with priority over all other secured lenders.
Correct answer
The excess is treated as additional financing provided by the buyer-lessor to the seller-lessee, and the bank's status depends on whether it holds a valid security interest under IBC.
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for General Studies?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Corporate Financial Reporting & IBC MCQs →Want more practice questions on Corporate Financial Reporting & IBC?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in General Studies · Corporate Financial Reporting & IBC