Operating Leases-Incentives: SIC Interpretation 15

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SIC-15

SIC Interpretation 15

Operating Leases—Incentives

This version includes amendments resulting from IFRSs issued up to 31 December 2010.

SIC-15 Operating Leases—Incentives was developed by the Standing Interpretations Committee


and issued in December 1998.

In April 2001 the International Accounting Standards Board resolved that all Standards
and Interpretations issued under previous Constitutions continued to be applicable unless
and until they were amended or withdrawn.

Since then, SIC-15 has been amended by the following IFRSs:

• IAS 17 Leases (as revised in December 2003)

• IAS 1 Presentation of Financial Statements (as revised in September 2007).*

* effective date 1 January 2009

© IFRS Foundation A1193


SIC-15

SIC Interpretation 15 Operating Leases—Incentives (SIC-15) is set out in paragraphs 3–6.


SIC-15 is accompanied by a Basis for Conclusions and illustrative examples. The scope
and authority of Interpretations are set out in paragraphs 2 and 7–16 of the Preface to
International Financial Reporting Standards.

FOR THE FOLLOWING MATERIAL ACCOMPANYING SIC-15:


• BASIS FOR CONCLUSIONS
• ILLUSTRATIVE EXAMPLES
SEE PART B OF THIS EDITION

A1194 © IFRS Foundation


SIC-15

SIC Interpretation 15
Operating Leases—Incentives

References

• IAS 1 Presentation of Financial Statements (as revised in 2007)

• IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

• IAS 17 Leases (as revised in 2003)

Issue

1 In negotiating a new or renewed operating lease, the lessor may provide


incentives for the lessee to enter into the agreement. Examples of such incentives
are an up-front cash payment to the lessee or the reimbursement or assumption
by the lessor of costs of the lessee (such as relocation costs, leasehold
improvements and costs associated with a pre-existing lease commitment of the
lessee). Alternatively, initial periods of the lease term may be agreed to be
rent-free or at a reduced rent.

2 The issue is how incentives in an operating lease should be recognised in the


financial statements of both the lessee and the lessor.

Consensus

3 All incentives for the agreement of a new or renewed operating lease shall be
recognised as an integral part of the net consideration agreed for the use of the
leased asset, irrespective of the incentive’s nature or form or the timing of
payments.

4 The lessor shall recognise the aggregate cost of incentives as a reduction of rental
income over the lease term, on a straight-line basis unless another systematic
basis is representative of the time pattern over which the benefit of the leased
asset is diminished.

5 The lessee shall recognise the aggregate benefit of incentives as a reduction of


rental expense over the lease term, on a straight-line basis unless another
systematic basis is representative of the time pattern of the lessee’s benefit from
the use of the leased asset.

6 Costs incurred by the lessee, including costs in connection with a pre-existing


lease (for example costs for termination, relocation or leasehold improvements),
shall be accounted for by the lessee in accordance with the Standards applicable
to those costs, including costs which are effectively reimbursed through an
incentive arrangement.

Date of consensus

June 1998

© IFRS Foundation A1195


SIC-15

Effective date

This Interpretation becomes effective for lease terms beginning on or after 1 January 1999.

A1196 © IFRS Foundation

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