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INVESTMENTS IN SALES-TYPE LEASES, DIRECT FINANCING LEASES AND LEASEBACK ASSETS | 6 Months Ended
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Jun. 30, 2021
Net Investment in Direct Financing and Sales Type Leases [Abstract] |
INVESTMENTS IN SALES-TYPE LEASES, DIRECT FINANCING LEASES AND LEASEBACK ASSETS | INVESTMENTS IN SALES-TYPE LEASES, DIRECT FINANCING LEASES AND LEASEBACK ASSETS The following lists the components of investments in sales-type leases, direct financing leases and leaseback assets as at June 30, 2021 and December 31, 2020:
(in thousands of $) | June 30, 2021
| Sales-Type Leases and Direct Financing Leases | Leaseback Assets | Total
Total minimum lease payments to be received | 209,368 |  | 72,144 |  | 281,512 |
Less: amounts representing estimated executory costs including profit thereon, included in total minimum lease payments | (37,440) |  | — |  | (37,440) |
Net minimum lease payments receivable | 171,928 |  | 72,144 |  | 244,072 |
Estimated residual values of leased property (unguaranteed) | 79,621 |  | 31,500 |  | 111,121 |
Less: unearned income | (31,320) |  | (22,590) |  | (53,910) |
Total investment in sales-type lease, direct financing lease and leaseback assets | 220,229 |  | 81,054 |  | 301,283 |
Allowance for expected credit losses* | (810) |  | (182) |  | (992) |
Total investment in sales-type lease, direct financing lease and leaseback assets | 219,419 |  | 80,872 |  | 300,291 |
Current portion | 31,619 |  | 9,889 |  | 41,508 |
Long-term portion | 187,800 |  | 70,983 |  | 258,783 |
(in thousands of $) | December 31, 2020
| Sales-Type Leases and Direct Financing Leases | Leaseback Assets | Total
Total minimum lease payments to be received | 705,196 |  | 79,786 |  | 784,982 |
Less: amounts representing estimated executory costs including profit thereon, included in total minimum lease payments | (40,698) |  | — |  | (40,698) |
Net minimum lease payments receivable | 664,498 |  | 79,786 |  | 744,284 |
Estimated residual values of leased property (unguaranteed) | 79,621 |  | 31,500 |  | 111,121 |
Less: unearned income | (147,876) |  | (25,596) |  | (173,472) |
Total investment in sales-type lease, direct financing lease and leaseback assets | 596,243 |  | 85,690 |  | 681,933 |
Allowance for expected credit losses* | (4,141) |  | (249) |  | (4,390) |
Total investment in sales-type lease, direct financing lease and leaseback assets | 592,102 |  | 85,441 |  | 677,543 |
Current portion | 45,888 |  | 9,532 |  | 55,420 |
Long-term portion | 546,214 |  | 75,909 |  | 622,123 |
*See Note 1: Interim financial data and Note 18: Allowance for expected credit losses. As at June 30, 2021, the Company had a total of 27 vessel charters accounted for as sales-type and direct financing leases (December 31, 2020: 28 vessels) and four vessel charters classified as leaseback assets (December 31, 2020: four vessels). Investments in sales-type and direct financing leases As at June 30, 2021, the Company had 15 container vessels accounted for as 'direct financing leases' which were chartered on long-term bareboat charters to MSC Mediterranean Shipping Company S.A. ("MSC"), an unrelated party. The terms of the charters for the 15 container vessels provide the charterer with purchase options throughout the term of the charters and the Company with a put option at the end of the seven years charter period. In July 2021, SFL was notified by MSC that they would exercise purchase options on the 15 container vessels. Three of the 15 vessels have been delivered to MSC and the remaining are expected to be delivered by the end of the third quarter of 2021 (refer to Note 20: Subsequent events). During the year ended December 31, 2020, the Company recognized the amount of $361.0 million in investments in direct financing leases in respect of one drilling unit (West Linus) which is held by a wholly owned subsidiary of the Company (SFL Linus Ltd.) and leased to a subsidiary of Seadrill. SFL Linus Ltd. was previously determined to be a variable interest entity in which the Company was not the primary beneficiary and the subsidiary was accounted for under the equity method. Following changes to the financing agreement in October 2020 as a result of defaults by Seadrill, the Company was determined to be the primary beneficiary of SFL Linus Ltd. and consolidates it from this date. On March 9, 2021, the bankruptcy court approved the Interim Funding and Settlement Agreement signed between the Company and Seadrill, allowing Seadrill to pay reduced charterhire for West Linus during the interim period. The change in charter rate met the definition of a modification resulting in the lease being reclassified from a direct financing lease to an operating lease. (See also Note 6: Vessels and equipment, net and Note 10: Investment in Associated Companies). River Box Holding Limited ("River Box") was previously a wholly owned subsidiary of the Company. It holds, through its subsidiaries, investments in direct financing leases in relation to the 19,200 and 19,400 TEU containerships MSC Anna, MSC Viviana, MSC Erica and MSC Reef. On December 31, 2020, the Company sold 50.1% of the shares of River Box to a subsidiary of Hemen Holding Ltd., or Hemen, a related party. Following the sale of River Box, the investments in the four container vessels accounted for as direct financing leases have been derecognized from the consolidated financial statements of the Company. (See also Note 10: Investment in Associated Companies and Note 17: Related Party Transactions). Investments in leaseback assets When a sale and leaseback transaction does not qualify for sale accounting, the Company does not recognize the transferred vessels and instead accounts for the purchase as a leaseback asset. In May 2020, SFL acquired a newbuild very large crude carrier ("VLCC") from Landbridge Universal Limited ("Landbridge") where control was not deemed to have passed to the Company due to the existence of repurchase options in the lease on acquisition and therefore was classified as a leaseback asset. Upon delivery, the vessel immediately commenced a seven year bareboat charter back to Landbridge. Landbridge have purchase options throughout the term of the charters and there is a purchase obligation at the end of the seven year period. In 2019, SFL acquired six vessels which were classified as 'leaseback assets'. Three of these six vessels were second-hand feeder size container vessels, which were acquired in a purchase and leaseback transaction with subsidiaries of MSC. The vessels were chartered back for approximately six years on a bareboat basis. The charterer has purchase options throughout the term of the charters and the Company has a put option at the end of the six year period. In July 2021, SFL was notified by MSC that they would exercise purchase options on the three container vessels. These three vessels have been delivered to MSC in August 2021 (refer to Note 20: Subsequent events). The three other vessels were newbuilding VLCCs, which were acquired from an affiliate of Hunter Grou p ASA ("Hunter Group") and leased back to the Hunter Group on five year bareboat charters. During the year ended December 31, 2020, SFL redelivered all three VLCC's to the Hunter Group, following exercise of the applicable options.

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- Definition The entire disclosure for lessor's leasing arrangements, which includes direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -SubTopic 30 -URI http://asc.fasb.org/subtopic&trid=2209026 + Details
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