SIC27 BV2009 - SIC-27 SIC Interpretation 27 Evaluating the...

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SIC-27 SIC Interpretation 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease This version includes amendments resulting from IFRSs issued up to 31 December 2008. SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease was developed by the Standing Interpretations Committee and issued in December 2001. Since then, SIC-27 has been amended by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (issued December 2003). IAS 1 Presentation of Financial Statements (as revised in September 2007) * amended the terminology used throughout IFRSs, including SIC-27. * effective date 1 January 2009 © IASCF 1
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SIC-27 SIC Interpretation 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease (SIC-27) is set out in paragraphs 3–11. SIC-27 is accompanied by a Basis for Conclusions and appendices illustrating the application of the Interpretation. The scope and authority of Interpretations are set out in paragraphs 2 and 7–17 of the Preface to International Financial Reporting Standards . 2 © IASCF
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SIC-27 SIC Interpretation 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease References IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 11 Construction Contracts IAS 17 Leases (as revised in 2003) IAS 18 Revenue IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 39 Financial Instruments: Recognition and Measurement (as revised in 2003) IFRS 4 Insurance Contracts Issue 1 An Entity may enter into a transaction or a series of structured transactions (an arrangement) with an unrelated party or parties (an Investor) that involves the legal form of a lease. For example, an Entity may lease assets to an Investor and lease the same assets back, or alternatively, legally sell assets and lease the same assets back. The form of each arrangement and its terms and conditions can vary significantly. In the lease and leaseback example, it may be that the arrangement is designed to achieve a tax advantage for the Investor that is shared with the Entity in the form of a fee, and not to convey the right to use an asset. 2 When an arrangement with an Investor involves the legal form of a lease, the issues are: (a) how to determine whether a series of transactions is linked and should be accounted for as one transaction; (b) whether the arrangement meets the definition of a lease under IAS 17; and, if not, (i) whether a separate investment account and lease payment obligations that might exist represent assets and liabilities of the Entity (eg consider the example described in paragraph A2(a) of Appendix A); (ii) how the Entity should account for other obligations resulting from the arrangement; and (iii) how the Entity should account for a fee it might receive from an Investor.
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SIC27 BV2009 - SIC-27 SIC Interpretation 27 Evaluating the...

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