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Classification of leases in SCOA

Classification of leases in SCOA. National/Provincial Road Shows July/August 2009 Presented by: SCOA Committee National Treasury. Content. Definition of a lease Types of lease agreements Classification of payments made in terms of a finance lease and operating lease

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Classification of leases in SCOA

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  1. Classification of leases in SCOA National/Provincial Road Shows July/August 2009 Presented by: SCOA Committee National Treasury

  2. Content • Definition of a lease • Types of lease agreements • Classification of payments made in terms of a finance lease and operating lease • Frequently asked questions (FAQ)

  3. Definition of a lease A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time

  4. Finance vs operating lease

  5. Classification Operating lease payments = current payments (use) Finance lease payments = capital payments (capital) Item Asset Project Lease Payments Operating lease Finance lease Interest Finance leases Leased assets Buildings & other Intangible assets Land & subsoil assets Other mach. & equip Transport assets Stand alone item Stand alone current Stand alone capital

  6. Operating lease Operating lease payments = current payments (use) Item Asset Project Lease Payments Operating lease Leased assets Transport assets Stand alone item Stand alone current • Amount recognised is equal to the payment made to the lessor (monthly, quarterly or annually)

  7. Finance lease Finance lease payments = capital payments (capital) Item Asset Project Lease Payments Finance lease Interest Finance leases Leased assets Transport assets Stand alone item Stand alone capital Stand alone current Amount recognised is equal to the payment made to the lessor (monthly, quarterly or annually) separating capital & interest

  8. FAQ • R5,000 rule does not apply to leases • Transitional arrangement in the classification circular • Classification is made at the inception of the lease • Leased assets are not included in the main asset register of a department (lease register is required) • Split between interest & capital – amortisation schedule starting with FV / present value of lease payments

  9. Questions?

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