Accounting for arrangements - Part 2

Abstract

SIC 27 (AC 427) and IFRIC 4 (AC 437) question two specific assertions with regard to lease transactions made by the management of an entity in preparing its financial statements, namely existence, occurrence and completeness. SIC 27 (AC 427) poses the question whether all transactions that have been accounted for in terms of IAS 17 (AC 105) are actually, in substance, lease transactions (existence or occurrence of lease transactions). SIC 27 (AC 427), therefore, requires the preparers of financial statements to consider arrangements where legal leases form part of a structured transaction to determine whether these arrangements, or part thereof, should be accounted for in terms of IAS 17 (AC 105). IFRIC 4 (AC 437), which was considered in the first article of this two-part series, poses the question whether all transactions, which are legally not leases, but are in substance leases, are accounted for in terms of IAS 17 (AC 105).