May 2006
In this newsletter, we look at the following topic:
Outsourcing contracts: an accidental business combination?
Outsourcing contracts are common. Many companies use outsourcing contracts to reduce costs, increase efficiency and focus on the core business. There are many different types of outsourcing arrangements, and the financial reporting of them can be complex. The expected outcome is generally that the outsourcing arrangement will be treated as a service arrangement, but an outsourcing contract may be classified as a business combination, lease or service concession. Whether it's a business combination, a lease, a construction contract or a service arrangement will depend on the contract with the customer; but the assessment requires a management's judgment.
Read more by downloading the pdf file below.
Note: HKFRS has converged with IFRS effective from 1 January 2005. Contents contained in this newsletter are also relevant to IFRS preparers.
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If you would like to have more information on the above, please contact Gladys Lau, +[852] 2289 2976, email me.
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Download our HKFRS News - May 2006 (pdf file, 129KB) for your reference.
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