Lease Agreement Meaning In Gujarati

Substance over form is an accounting principle that is used „to ensure that financial statements provide a complete, relevant and accurate picture of transactions and events.“ When a company practices the concept of „substance above form,“ the financial statements show the general financial reality of the business (economic substance) and not the legal form of the transactions. [1] When accounting for commercial transactions and other events, it is necessary to measure and report on the economic impact of an event and not on its legal form. Substance through a form is essential for a reliable financial report. It is particularly important for sales acquisition, sales and sales contracts, etc. The central point of the concept is that a transaction should not be accounted for in such a way as to obscure the true intent of the transaction, which would lead readers to a company`s annual accounts to be misread. A lease agreement cannot transfer ownership of the leased property to the taker. However, in certain circumstances, the underwriter may be required to account for the lease asset as an asset if the underwriter is considering using the asset for a substantial portion of its useful term, or where the present value of future leases is close to the fair value of the asset. Although the lease owner does not own the lease, the lessor may be required to account for the assets as the lessor`s property on the basis of the underlying profitability of the transaction. Another example is the situation in which a company that does not have cash sells its machines to the bank and then leases the same property to the bank. This scheme is referred to as „sale and leasing.“ Although legal ownership has been transferred to the bank, the underlying economic reality remains the same for the company. Under the „substance-over-form“ principle, the sale and subsequent repurchase of leasing is considered a transaction. [The rule in] IAS 17 Leasing debtors require contract creators to consider the content of leases to determine the nature of the lease for accounting purposes.

For example, an asset may be leased to a taker without a legal transfer of ownership at the end of the rental period. Such a lease agreement can be considered a financing lease insofar as, for example.B. the duration of the lease is essentially the duration of the total usefulness of the asset or if the lease allows the underwriter to acquire the asset at a very nominal price at the end of the lease period, and it is very likely that this option will be exercised by the taker in the current circumstances. [2] The annual accounts established by the „substance on form“ are relatively more reliable. [Keywords] Below are examples of the application of the concept in International Financial Reporting Standards (IFRS). The principle strictly regulates and resolves disputes over whether workers are self-employed contractors or employees: tax legislation prohibits the billing of persons who are essentially employees in the form of independent contractors. The question of which form can be applied to a particular case raises an objective test of the content of the work.

Rubrika: Nezařazené |