SIC-27
Historical
Evaluating the Substance of Transactions Involving the Legal Form of a Lease
Addressed how to evaluate transactions structured to involve the legal form of a lease but lacking economic substance, requiring unbundling of fees and obligations. Superseded in 2019.
Historical Reference
SIC-27 was withdrawn in January 2016 when the IASB issued IFRS 16 Leases, which superseded SIC-27 by replacing IAS 17 and restructuring lease scope guidance, including the evaluation of substance in lease-like transactions.
This page is retained for historical and comparative reference. Entities should refer to the current standard that superseded this interpretation for authoritative guidance.
Current Standard
IFRS 16 Leases 1
What SIC-27 Addressed (Historical)
What SIC-27 addressed
SIC-27 addressed how to evaluate transactions that involve the legal form of a lease but may lack economic substance. It considered whether fees and obligations embedded in such arrangements should be unbundled and accounted for separately based on their economic substance rather than their legal form under IAS 17.
2
The Conclusion It Reached (Historical)
The conclusion it reached
SIC-27 concluded that transactions involving the legal form of a lease but lacking economic substance should be unbundled. The entity should account for the individual components based on their substantive nature, applying IFRSs relevant to each component. Fees that are not for the use of an asset should not be included in minimum lease payments, and obligations that do not relate to the right to use the asset should be accounted for as separate contracts.
3
Where This Guidance Lives Today
Where this guidance lives today
Superseded byIFRS 16 Leases
Why withdrawnThe 2016 standard replaced IAS 17 and restructured lease scope guidance
Current statusSuperseded
Glossary
Economic substance
The underlying economic reality of an arrangement, which may differ from its legal form, requiring analysis under SIC-27.
Bundling
Combining multiple components with different economic natures into a single lease arrangement, which SIC-27 required to be unbundled when substance differed from form.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Jan-2001
In January 2001 the Standing Interpretations Committee issued SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
Apr-2001
In April 2001 the International Accounting Standards Board adopted SIC-27.
Minor consequential amendment to SIC-27
Jan-2016
In January 2016 the Board issued IFRS 16 Leases which superseded SIC-27.
Superseded by IFRS 16