SIC Interpretation 7

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an

Introduction of the Euro

ts

SIC-7

In April 2001 the International Accounting Standards Board adopted SIC-7 Introduction of the
Euro, which had originally been issued by the Standing Interpretations Committee of the
International Accounting Standards Committee in May 1998.

Other Standards have made minor consequential amendments to SIC-7, including IFRS 9

Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39)

GC

Co

ns

(issued November 2013).

IFRS Foundation

A1479

ts

SIC-7

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an

SIC Interpretation 7 Introduction of the Euro (SIC-7) is set out in paragraphs 3 and 4. SIC-7 is
accompanied by a Basis for Conclusions. The scope and authority of Interpretations are
set out in paragraphs 2 and 716 of the Preface to International Financial Reporting Standards.

GC

Co

ns

FOR THE BASIS FOR CONCLUSIONS ON SIC-7 SEE PART B OF THIS EDITION

A1480

IFRS Foundation

ts

SIC-7

References

ult
an

SIC Interpretation 7
Introduction of the Euro

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

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

IAS 10 Events after the Reporting Period

IAS 21 The Effects of Changes in Foreign Exchange Rates (as revised in 2003)

IAS 27 Consolidated and Separate Financial Statements (as amended in 2008)

Issue

From 1 January 1999, the effective start of Economic and Monetary Union (EMU),
the euro will become a currency in its own right and the conversion rates
between the euro and the participating national currencies will be irrevocably
fixed, ie the risk of subsequent exchange differences related to these currencies
is eliminated from this date on.

The issue is the application of IAS 21 to the changeover from the national
currencies of participating Member States of the European Union to the euro
(the changeover).

ns

Co

Consensus

The requirements of IAS 21 regarding the translation of foreign currency

transactions and financial statements of foreign operations should be strictly
applied to the changeover. The same rationale applies to the fixing of exchange
rates when countries join EMU at later stages.
This means that, in particular:

foreign currency monetary assets and liabilities resulting from

transactions shall continue to be translated into the functional currency
at the closing rate. Any resultant exchange differences shall be
recognised as income or expense immediately, except that an entity shall
continue to apply its existing accounting policy for exchange gains and
losses related to hedges of the currency risk of a forecast transaction;

GC

(a)

(b)

cumulative exchange differences relating to the translation of financial

statements of foreign operations, recognised in other comprehensive
income, shall be accumulated in equity and shall be reclassified from
equity to profit or loss only on the disposal or partial disposal of the net
investment in the foreign operation; and

(c)

exchange differences resulting from the translation of liabilities

denominated in participating currencies shall not be included in the
carrying amount of related assets.

IFRS Foundation

A1481

ts

SIC-7

Date of consensus

Effective date

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an

October 1997

This Interpretation becomes effective on 1 June 1998. Changes in accounting policies shall
be accounted for according to the requirements of IAS 8.
IAS 1 (as revised in 2007) amended the terminology used throughout IFRSs. In addition it
amended paragraph 4. An entity shall apply those amendments for annual periods
beginning on or after 1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier
period, the amendments shall be applied for that earlier period.

GC

Co

ns

IAS 27 (as amended in 2008) amended paragraph 4(b). An entity shall apply that
amendment for annual periods beginning on or after 1 July 2009. If an entity applies IAS 27
(amended 2008) for an earlier period, the amendment shall be applied for that earlier
period.

A1482

IFRS Foundation

SIC Interpretation 10

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an

Government AssistanceNo Specific

Relation to Operating Activities

ts

SIC-10

In April 2001 the International Accounting Standards Board adopted SIC-10 Government
AssistanceNo Specific Relation to Operating Activities, which had originally been issued by the

GC

Co

ns

Standing Interpretations Committee of the International Accounting Standards Committee

in July 1998.

IFRS Foundation

A1483

ts

SIC-10

ult
an

SIC Interpretation 10 Government AssistanceNo Specific Relation to Operating Activities (SIC-10)

is set out in paragraph 3. SIC-10 is accompanied by a Basis for Conclusions. The scope
and authority of Interpretations are set out in paragraphs 2 and 716 of the Preface to
International Financial Reporting Standards.

GC

Co

ns

FOR THE BASIS FOR CONCLUSIONS ON SIC-10 SEE PART B OF THIS EDITION

A1484

IFRS Foundation

ts

SIC-10

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an

SIC Interpretation 10
Government AssistanceNo Specific Relation to Operating
Activities
References

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

Issue

In some countries government assistance to entities may be aimed at

encouragement or long-term support of business activities either in certain
regions or industry sectors. Conditions to receive such assistance may not be
specifically related to the operating activities of the entity. Examples of such
assistance are transfers of resources by governments to entities which:
(a)

operate in a particular industry;

(b)

continue operating in recently privatised industries; or

(c)

start or continue to run their business in underdeveloped areas.

The issue is whether such government assistance is a government grant within

the scope of IAS 20 and, therefore, should be accounted for in accordance with
this Standard.

Co

Consensus
3

ns

Government assistance to entities meets the definition of government grants in

IAS 20, even if there are no conditions specifically relating to the operating
activities of the entity other than the requirement to operate in certain regions
or industry sectors. Such grants shall therefore not be credited directly to
shareholders interests.

Date of consensus

January 1998

Effective date

GC

This Interpretation becomes effective on 1 August 1998. Changes in accounting policies

shall be accounted for in accordance with IAS 8.

IFRS Foundation

A1485

GC
ts

ult
an

ns

Co

SIC Interpretation 15

ult
an

Operating LeasesIncentives

ts

SIC-15

In April 2001 the International Accounting Standards Board adopted SIC-15 Operating
LeasesIncentives, which had originally been issued by the Standing Interpretations

GC

Co

ns

Committee of the International Accounting Standards Committee in December 1998.

IFRS Foundation

A1487

ts

SIC-15

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an

SIC Interpretation 15 Operating LeasesIncentives (SIC-15) is set out in paragraphs 36.

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 716 of the Preface to
International Financial Reporting Standards.
FOR THE FOLLOWING MATERIAL ACCOMPANYING SIC-15:

BASIS FOR CONCLUSIONS

ILLUSTRATIVE EXAMPLE

GC

Co

ns

SEE PART B OF THIS EDITION

A1488

IFRS Foundation

ts

SIC-15

References

ult
an

SIC Interpretation 15
Operating LeasesIncentives

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

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.

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

financial statements of both the lessee and the lessor.

Consensus

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.
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 lessees benefit from
the use of the leased asset.

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 incentives nature or form or the timing of
payments.

Co

ns

GC

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

A1489

ts

SIC-15

Effective date

GC

Co

ns

ult
an

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

A1490

IFRS Foundation

ts

SIC-25

SIC Interpretation 25

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an

Income TaxesChanges in the Tax Status

of an Entity or its Shareholders

In April 2001 the International Accounting Standards Board adopted SIC-25 Income
TaxesChanges in the Tax Status of an Entity or its Shareholders, which had originally been issued

GC

Co

ns

by the Standing Interpretations Committee of the International Accounting Standards

Committee in July 2000.

IFRS Foundation

A1491

ts

SIC-25

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an

SIC Interpretation 25 Income TaxesChanges in the Tax Status of an Entity or its Shareholders
(SIC-25) is set out in paragraph 4. SIC-25 is accompanied by a Basis for Conclusions. The
scope and authority of Interpretations are set out in paragraphs 2 and 716 of the Preface
to International Financial Reporting Standards.

GC

Co

ns

FOR THE BASIS FOR CONCLUSIONS ON SIC-25 SEE PART B OF THIS EDITION

A1492

IFRS Foundation

ts

SIC-25

References

ult
an

SIC Interpretation 25
Income TaxesChanges in the Tax Status of an Entity or its
Shareholders

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

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

IAS 12 Income Taxes

Issue

A change in the tax status of an entity or of its shareholders may have

consequences for an entity by increasing or decreasing its tax liabilities or assets.
This may, for example, occur upon the public listing of an entitys equity
instruments or upon the restructuring of an entitys equity. It may also occur
upon a controlling shareholders move to a foreign country. As a result of such
an event, an entity may be taxed differently; it may for example gain or lose tax
incentives or become subject to a different rate of tax in the future.

A change in the tax status of an entity or its shareholders may have an

immediate effect on the entitys current tax liabilities or assets. The change may
also increase or decrease the deferred tax liabilities and assets recognised by the
entity, depending on the effect the change in tax status has on the tax
consequences that will arise from recovering or settling the carrying amount of
the entitys assets and liabilities.

Co

ns

The issue is how an entity should account for the tax consequences of a change
in its tax status or that of its shareholders.

Consensus

A change in the tax status of an entity or its shareholders does not give rise to
increases or decreases in amounts recognised outside profit or loss. The current
and deferred tax consequences of a change in tax status shall be included in
profit or loss for the period, unless those consequences relate to transactions and
events that result, in the same or a different period, in a direct credit or charge
to the recognised amount of equity or in amounts recognised in other
comprehensive income. Those tax consequences that relate to changes in the
recognised amount of equity, in the same or a different period (not included in
profit or loss), shall be charged or credited directly to equity. Those tax
consequences that relate to amounts recognised in other comprehensive income
shall be recognised in other comprehensive income.

GC

Date of consensus
August 1999

IFRS Foundation

A1493

ts

SIC-25

Effective date

ult
an

This consensus becomes effective on 15 July 2000. Changes in accounting policies shall be
accounted for in accordance with IAS 8.

GC

Co

ns

IAS 1 (as revised in 2007) amended the terminology used throughout IFRSs. In addition it
amended paragraph 4. An entity shall apply those amendments for annual periods
beginning on or after 1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier
period, the amendments shall be applied for that earlier period.

A1494

IFRS Foundation

ts

SIC-27

SIC Interpretation 27

ult
an

Evaluating the Substance of Transactions

Involving the Legal Form of a Lease

In December 2001 the International Accounting Standards Board issued SIC-27 Evaluating the
Substance of Transactions Involving the Legal Form of a Lease, which had originally been developed
by the Standing Interpretations Committee of the International Accounting Standards
Committee.

GC

Co

ns

Other Standards have made minor consequential amendments to SIC-27. They include
IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39)
(issued November 2013), IFRS 15 Revenue from Contracts with Customers (issued May 2014) and
IFRS 9 Financial Instruments (issued July 2014).

IFRS Foundation

A1495

ts

SIC-27

ult
an

SIC Interpretation 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease
(SIC-27) is set out in paragraphs 311. SIC-27 is accompanied by a Basis for Conclusions
and implementation guidance. The scope and authority of Interpretations are set out in
paragraphs 2 and 716 of the Preface to International Financial Reporting Standards.
FOR THE FOLLOWING MATERIAL ACCOMPANYING SIC-27:

BASIS FOR CONCLUSIONS

IMPLEMENTATION GUIDANCE
A Linked transactions
B The substance of an agreement

GC

Co

ns

SEE PART B OF THIS EDITION

A1496

IFRS Foundation

ts

SIC-27

References

ult
an

SIC Interpretation 27
Evaluating the Substance of Transactions Involving the
Legal Form of a Lease

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

IAS 17 Leases (as revised in 2003)

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IFRS 4 Insurance Contracts

IFRS 9 Financial Instruments

IFRS 15 Revenue from Contracts with Customers

Issue

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.

Co

ns

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,

GC

(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
the guidance accompanying the Interpretation);

(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.

Consensus
3

A series of transactions that involve the legal form of a lease is linked and shall
be accounted for as one transaction when the overall economic effect cannot be

IFRS Foundation

A1497

ts

SIC-27

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an

understood without reference to the series of transactions as a whole. This is the

case, for example, when the series of transactions are closely interrelated,
negotiated as a single transaction, and takes place concurrently or in a
continuous sequence.
(Part A of the accompanying guidance provides
illustrations of application of this Interpretation.)
4

The accounting shall reflect the substance of the arrangement. All aspects and
implications of an arrangement shall be evaluated to determine its substance,
with weight given to those aspects and implications that have an economic
effect.

IAS 17 applies when the substance of an arrangement includes the conveyance

of the right to use an asset for an agreed period of time. Indicators that
individually demonstrate that an arrangement may not, in substance, involve a
lease under IAS 17 include (Part B of the accompanying guidance provides
illustrations of application of this Interpretation):
an Entity retains all the risks and rewards incident to ownership of an
underlying asset and enjoys substantially the same rights to its use as
before the arrangement;

(b)

the primary reason for the arrangement is to achieve a particular tax

result, and not to convey the right to use an asset; and

(c)

an option is included on terms that make its exercise almost certain (eg a
put option that is exercisable at a price sufficiently higher than the
expected fair value when it becomes exercisable).

ns

(a)

the Entity is not able to control the investment account in pursuit of its
own objectives and is not obligated to pay the lease payments. This
occurs when, for example, a prepaid amount is placed in a separate
investment account to protect the Investor and may only be used to pay
the Investor, the Investor agrees that the lease payment obligations are
to be paid from funds in the investment account, and the Entity has no
ability to withhold payments to the Investor from the investment
account;

(a)

Co

The definitions and guidance in paragraphs 4964 of the Framework1 shall be

applied in determining whether, in substance, a separate investment account
and lease payment obligations represent assets and liabilities of the Entity.
Indicators that collectively demonstrate that, in substance, a separate
investment account and lease payment obligations do not meet the definitions
of an asset and a liability and shall not be recognised by the Entity include:

GC

(b)

the Entity has only a remote risk of reimbursing the entire amount of
any fee received from an Investor and possibly paying some additional
amount, or, when a fee has not been received, only a remote risk of
paying an amount under other obligations (eg a guarantee). Only a
remote risk of payment exists when, for example, the terms of the

The reference to the Framework is to IASCs Framework for the Preparation and Presentation of Financial
Statements, adopted by the IASB in 2001. In September 2010 the IASB replaced the Framework with
the Conceptual Framework for Financial Reporting. Paragraphs 4964 are now paragraphs 4.44.19 of the
Conceptual Framework.

A1498

IFRS Foundation

ts

SIC-27
arrangement require that a prepaid amount is invested in risk-free assets
that are expected to generate sufficient cash flows to satisfy the lease
payment obligations; and
other than the initial cash flows at inception of the arrangement, the
only cash flows expected under the arrangement are the lease payments
that are satisfied solely from funds withdrawn from the separate
investment account established with the initial cash flows.

ult
an

(c)

Other obligations of an arrangement, including any guarantees provided and

obligations incurred upon early termination, shall be accounted for under
IAS 37, IFRS 4 or IFRS 9, depending on the terms.

The requirements in IFRS 15 shall be applied to the facts and circumstances of

each arrangement in determining when to recognise a fee as income that an
Entity might receive. Factors such as whether there is continuing involvement
in the form of significant future performance obligations necessary to earn the
fee, whether there are retained risks, the terms of any guarantee arrangements,
and the risk of repayment of the fee, shall be considered. Indicators that
individually demonstrate that recognition of the entire fee as income when
received, if received at the beginning of the arrangement, is inappropriate
include:

ns

obligations either to perform or to refrain from certain significant

activities are conditions of earning the fee received, and therefore
execution of a legally binding arrangement is not the most significant
act required by the arrangement;

(b)

limitations are put on the use of the underlying asset that have the
practical effect of restricting and significantly changing the Entitys
ability to use (eg deplete, sell or pledge as collateral) the asset;

Co

(a)

the possibility of reimbursing any amount of the fee and possibly paying
some additional amount is not remote. This occurs when, for example,
(i)

the underlying asset is not a specialised asset that is required by

the Entity to conduct its business, and therefore there is a
possibility that the Entity may pay an amount to terminate the
arrangement early; or

(ii)

the Entity is required by the terms of the arrangement, or has

some or total discretion, to invest a prepaid amount in assets
carrying more than an insignificant amount of risk (eg currency,
interest rate or credit risk). In this circumstance, the risk of the
investments value being insufficient to satisfy the lease payment
obligations is not remote, and therefore there is a possibility that
the Entity may be required to pay some amount.

(c)

GC

The fee shall be presented in the statement of comprehensive income based on

its economic substance and nature.

IFRS Foundation

A1499

ts

SIC-27

Disclosure

(a)

(b)

11

ult
an

All aspects of an arrangement that does not, in substance, involve a lease under
IAS 17 shall be considered in determining the appropriate disclosures that are
necessary to understand the arrangement and the accounting treatment
adopted. An Entity shall disclose the following in each period that an
arrangement exists:
a description of the arrangement including:
(i)

the underlying asset and any restrictions on its use;

(ii)

the life and other significant terms of the arrangement;

(iii)

the transactions that are linked together, including any options;

and

the accounting treatment applied to any fee received, the amount

recognised as income in the period, and the line item of the statement of
comprehensive income in which it is included.

The disclosures required in accordance with paragraph 10 of this Interpretation

shall be provided individually for each arrangement or in aggregate for each
class of arrangement. A class is a grouping of arrangements with underlying
assets of a similar nature (eg power plants).

Date of consensus
February 2000

Co

Effective date

ns

10

This Interpretation becomes effective on 31 December 2001. Changes in accounting policies

shall be accounted for in accordance with IAS 8.
IFRS 9 amended paragraph 7. An entity shall apply that amendment when it applies IFRS 9.

GC

IFRS 15 Revenue from Contracts with Customers, issued in May 2014, amended the References
section and paragraph 8. An entity shall apply those amendments when it applies IFRS 15.

A1500

IFRS Foundation

SIC Interpretation 29

ult
an

Service Concession Arrangements:

Disclosures

ts

SIC-29

In December 2001 the International Accounting Standards Board (IASB) issued SIC-29
DisclosureService Concession Arrangements, which had originally been developed by the
Standing Interpretations Committee of the International Accounting Standards Committee.

GC

Co

ns

In November 2006, when the IASB issued IFRIC 12 Service Concession Arrangements, SIC-29s
title was changed to Service Concession Arrangements: Disclosures.

IFRS Foundation

A1501

ts

SIC-29

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an

SIC Interpretation 29 Service Concession Arrangements: Disclosures (SIC-29) is set out in

paragraphs 67. SIC-29 is accompanied by a Basis for Conclusions. The scope and
authority of Interpretations are set out in paragraphs 2 and 716 of the Preface to
International Financial Reporting Standards.

GC

Co

ns

FOR THE BASIS FOR CONCLUSIONS ON SIC-29 SEE PART B OF THIS EDITION

A1502

IFRS Foundation

References

ult
an

SIC Interpretation 29
Service Concession Arrangements: Disclosures

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

IAS 16 Property, Plant and Equipment (as revised in 2003)

IAS 17 Leases (as revised in 2003)

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IAS 38 Intangible Assets (as revised in 2004)

IFRIC 12 Service Concession Arrangements

Issue

An entity (the operator) may enter into an arrangement with another entity (the
grantor) to provide services that give the public access to major economic and
social facilities. The grantor may be a public or private sector entity, including a
governmental body. Examples of service concession arrangements involve water
treatment and supply facilities, motorways, car parks, tunnels, bridges, airports
and telecommunication networks. Examples of arrangements that are not
service concession arrangements include an entity outsourcing the operation of
its internal services (eg employee cafeteria, building maintenance, and
accounting or information technology functions).

Co

ns

ts

SIC-29

A service concession arrangement generally involves the grantor conveying for

the period of the concession to the operator:
(a)

the right to provide services that give the public access to major
economic and social facilities, and

(b)

in some cases, the right to use specified tangible assets, intangible assets,
or financial assets,

in exchange for the operator:

committing to provide the services according to certain terms and

conditions during the concession period, and

(c)

(d)

GC

when applicable, committing to return at the end of the concession

period the rights received at the beginning of the concession period
and/or acquired during the concession period.

The common characteristic of all service concession arrangements is that the

operator both receives a right and incurs an obligation to provide public
services.

The issue is what information should be disclosed in the notes in the financial
statements of an operator and a grantor.

Certain aspects and disclosures relating to some service concession

arrangements are already addressed by existing International Financial

IFRS Foundation

A1503

ts

SIC-29

ult
an

Reporting Standards (eg IAS 16 applies to acquisitions of items of property, plant

and equipment, IAS 17 applies to leases of assets, and IAS 38 applies to
acquisitions of intangible assets). However, a service concession arrangement
may involve executory contracts that are not addressed in International
Financial Reporting Standards, unless the contracts are onerous, in which case
IAS 37 applies. Therefore, this Interpretation addresses additional disclosures of
service concession arrangements.

Consensus

All aspects of a service concession arrangement shall be considered in

determining the appropriate disclosures in the notes. An operator and a grantor
shall disclose the following in each period:
a description of the arrangement;

(b)

significant terms of the arrangement that may affect the amount, timing
and certainty of future cash flows (eg the period of the concession,
re-pricing dates and the basis upon which re-pricing or re-negotiation is
determined);

(c)

the nature and extent (eg quantity, time period or amount as

appropriate) of:

(d)
(e)

(i)

rights to use specified assets;

(ii)

obligations to provide or rights to expect provision of services;

(iii)

obligations to acquire or build items of property, plant and

equipment;

(iv)

obligations to deliver or rights to receive specified assets at the

end of the concession period;

(v)

renewal and termination options; and

(vi)

other rights and obligations (eg major overhauls);

changes in the arrangement occurring during the period; and

how the service arrangement has been classified.

An operator shall disclose the amount of revenue and profits or losses

recognised in the period on exchanging construction services for a financial
asset or an intangible asset.

6A

ns

(a)

Co

The disclosures required in accordance with paragraph 6 of this Interpretation

shall be provided individually for each service concession arrangement or in
aggregate for each class of service concession arrangements. A class is a
grouping of service concession arrangements involving services of a similar
nature (eg toll collections, telecommunications and water treatment services).

GC

Date of consensus
May 2001

A1504

IFRS Foundation

Effective date

ult
an

This Interpretation becomes effective on 31 December 2001.

ts

SIC-29

GC

Co

ns

An entity shall apply the amendment in paragraphs 6(e) and 6A for annual periods
beginning on or after 1 January 2008. If an entity applies IFRIC 12 for an earlier period, the
amendment shall be applied for that earlier period.

IFRS Foundation

A1505

GC
ts

ult
an

ns

Co

SIC Interpretation 32

ult
an

Intangible AssetsWeb Site Costs

ts

SIC-32

In March 2002 the International Accounting Standards Board issued SIC-32 Intangible
AssetsWeb Site Costs, which had originally been developed by the Standing Interpretations
Committee of the International Accounting Standards Committee.

GC

Co

ns

Other Standards have made minor consequential amendments to SIC-32, including IFRS 15
Revenue from Contracts with Customers (issued May 2014).

IFRS Foundation

A1507

ts

SIC-32

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an

SIC Interpretation 32 Intangible AssetsWeb Site Costs (SIC-32) is set out in paragraphs 710.
SIC-32 is accompanied by a Basis for Conclusions and an example illustrating the
application of the Interpretation. The scope and authority of Interpretations are set out
in paragraphs 2 and 716 of the Preface to International Financial Reporting Standards.
FOR THE FOLLOWING MATERIAL ACCOMPANYING SIC-32:

BASIS FOR CONCLUSIONS

ILLUSTRATIVE EXAMPLE

GC

Co

ns

SEE PART B OF THIS EDITION

A1508

IFRS Foundation

References

ult
an

SIC Interpretation 32
Intangible AssetsWeb Site Costs

IFRS 3 Business Combinations

IFRS 15 Revenue from Contracts with Customers

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

IAS 2 Inventories (as revised in 2003)

IAS 16 Property, Plant and Equipment (as revised in 2003)

IAS 17 Leases (as revised in 2003)

IAS 36 Impairment of Assets (as revised in 2004)

IAS 38 Intangible Assets (as revised in 2004)

The stages of a web sites development can be described as follows:

(a)

Planningincludes undertaking feasibility studies, defining objectives

and specifications, evaluating alternatives and selecting preferences.

(b)

Application and Infrastructure Developmentincludes obtaining a

domain name, purchasing and developing hardware and operating
software, installing developed applications and stress testing.

(c)

Graphical Design Developmentincludes designing the appearance of

web pages.

(d)

Content Developmentincludes creating, purchasing, preparing and

uploading information, either textual or graphical in nature, on the web
site before the completion of the web sites development. This
information may either be stored in separate databases that are
integrated into (or accessed from) the web site or coded directly into the
web pages.

An entity may incur internal expenditure on the development and operation of

its own web site for internal or external access. A web site designed for external
access may be used for various purposes such as to promote and advertise an
entitys own products and services, provide electronic services, and sell products
and services. A web site designed for internal access may be used to store
company policies and customer details, and search relevant information.

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SIC-32

Once development of a web site has been completed, the Operating stage begins.
During this stage, an entity maintains and enhances the applications,
infrastructure, graphical design and content of the web site.

When accounting for internal expenditure on the development and operation of

an entitys own web site for internal or external access, the issues are:

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whether the web site is an internally generated intangible asset that is
subject to the requirements of IAS 38; and

(b)

the appropriate accounting treatment of such expenditure.

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(a)

This Interpretation does not apply to expenditure on purchasing, developing,

and operating hardware (eg web servers, staging servers, production servers and
Internet connections) of a web site. Such expenditure is accounted for under
IAS 16. Additionally, when an entity incurs expenditure on an Internet service
provider hosting the entitys web site, the expenditure is recognised as an
expense under IAS 1.88 and the Framework1 when the services are received.

IAS 38 does not apply to intangible assets held by an entity for sale in the
ordinary course of business (see IAS 2 and IFRS 15) or leases that fall within the
scope of IAS 17. Accordingly, this Interpretation does not apply to expenditure
on the development or operation of a web site (or web site software) for sale to
another entity. When a web site is leased under an operating lease, the lessor
applies this Interpretation. When a web site is leased under a finance lease, the
lessee applies this Interpretation after initial recognition of the leased asset.

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Consensus

An entitys own web site that arises from development and is for internal or
external access is an internally generated intangible asset that is subject to the
requirements of IAS 38.

A web site arising from development shall be recognised as an intangible asset if,
and only if, in addition to complying with the general requirements described in
IAS 38.21 for recognition and initial measurement, an entity can satisfy the
requirements in IAS 38.57. In particular, an entity may be able to satisfy the
requirement to demonstrate how its web site will generate probable future
economic benefits in accordance with IAS 38.57(d) when, for example, the web
site is capable of generating revenues, including direct revenues from enabling
orders to be placed. An entity is not able to demonstrate how a web site
developed solely or primarily for promoting and advertising its own products
and services will generate probable future economic benefits, and consequently
all expenditure on developing such a web site shall be recognised as an expense
when incurred.

Any internal expenditure on the development and operation of an entitys own

web site shall be accounted for in accordance with IAS 38. The nature of each
activity for which expenditure is incurred (eg training employees and
maintaining the web site) and the web sites stage of development or
post-development shall be evaluated to determine the appropriate accounting
treatment (additional guidance is provided in the illustrative example
accompanying this Interpretation). For example:

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The reference to the Framework is to IASCs Framework for the Preparation and Presentation of Financial
Statements, adopted by the IASB in 2001. In September 2010 the IASB replaced the Framework with
the Conceptual Framework for Financial Reporting.

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the Planning stage is similar in nature to the research phase in
IAS 38.54.56. Expenditure incurred in this stage shall be recognised as
an expense when it is incurred.

(b)

the Application and Infrastructure Development stage, the Graphical

Design stage and the Content Development stage, to the extent that
content is developed for purposes other than to advertise and promote
an entitys own products and services, are similar in nature to the
development phase in IAS 38.57.64. Expenditure incurred in these
stages shall be included in the cost of a web site recognised as an
intangible asset in accordance with paragraph 8 of this Interpretation
when the expenditure can be directly attributed and is necessary to
creating, producing or preparing the web site for it to be capable of
operating in the manner intended by management. For example,
expenditure on purchasing or creating content (other than content that
advertises and promotes an entitys own products and services)
specifically for a web site, or expenditure to enable use of the content
(eg a fee for acquiring a licence to reproduce) on the web site, shall be
included in the cost of development when this condition is met.
However, in accordance with IAS 38.71, expenditure on an intangible
item that was initially recognised as an expense in previous financial
statements shall not be recognised as part of the cost of an intangible
asset at a later date (eg if the costs of a copyright have been fully
amortised, and the content is subsequently provided on a web site).

(c)

expenditure incurred in the Content Development stage, to the extent

that content is developed to advertise and promote an entitys own
products and services (eg digital photographs of products), shall be
recognised as an expense when incurred in accordance with IAS 38.69(c).
For example, when accounting for expenditure on professional services
for taking digital photographs of an entitys own products and for
enhancing their display, expenditure shall be recognised as an expense
as the professional services are received during the process, not when the
digital photographs are displayed on the web site.

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(a)

(d)

A web site that is recognised as an intangible asset under paragraph 8 of this

Interpretation shall be measured after initial recognition by applying the
requirements of IAS 38.72.87. The best estimate of a web sites useful life
should be short.

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the Operating stage begins once development of a web site is complete.

Expenditure incurred in this stage shall be recognised as an expense
when it is incurred unless it meets the recognition criteria in IAS 38.18.

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Effective date

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This Interpretation becomes effective on 25 March 2002. The effects of adopting this
Interpretation shall be accounted for using the transition requirements in the version of
IAS 38 that was issued in 1998. Therefore, when a web site does not meet the criteria for
recognition as an intangible asset, but was previously recognised as an asset, the item shall
be derecognised at the date when this Interpretation becomes effective. When a web site
exists and the expenditure to develop it meets the criteria for recognition as an intangible
asset, but was not previously recognised as an asset, the intangible asset shall not be
recognised at the date when this Interpretation becomes effective. When a web site exists
and the expenditure to develop it meets the criteria for recognition as an intangible asset,
was previously recognised as an asset and initially measured at cost, the amount initially
recognised is deemed to have been properly determined.
IAS 1 (as revised in 2007) amended the terminology used throughout IFRSs. In addition it
amended paragraph 5. An entity shall apply those amendments for annual periods
beginning on or after 1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier
period, the amendments shall be applied for that earlier period.

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IFRS 15 Revenue from Contracts with Customers, issued in May 2014, amended the References
section and paragraph 6. An entity shall apply that amendment when it applies IFRS 15.

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