Sale and Repurchase

Question $3$

On $1$ March $2021$ Tree sold a property to a bank for $5$ million. The market value of the property at the date of the sale was $10$ million. Tree continues to occupy the property rent free.

Tree has the option to buy the property back from the bank at the end of every month from $31$ March $2021$ until $28$ February $2026.$ Tree has not yet exercised this option. The repurchase price will be $5$ million plus $50,000$ for every month that has elapsed from the date of the sale to the date of repurchase.

The bank cannot require Tree to repurchase the property after $28$ February $2026.$

The directors of Tree expect property prices to rise at around $5\%$ for the foreseeable future.

Explain how Tree should deal with this transaction within its financial statements for the year ended $31$ August $2021.$