Journal of Law and Financial Management - Volume 8(1) June 2009
Cross-Regulatory Arbitrage: An Illustration from Leasing
By Eva Huang
When a corporation is making financing decisions, accounting/regulatory arbitrage and tax arbitrage are important considerations. In November 2000, David Jones entered into an in-substance sale and leaseback transaction with Deutsche Bank in relation to its flagship stores in Sydney and Melbourne. This transaction differs from the more traditional sale and leaseback transactions such as those in Metal Manufactures Ltd v Federal Commissioner of Taxation (1999) 43 ATR 375 and Eastern Nitrogen Ltd v Federal Commissioner of Taxation (2001) 46 ATR 474 . In both cases, a form of proprietary interest in the leased properties vested in the lessors. In the David Jones transaction, David Jones retained freehold title to the buildings and transferred economic control of the property to Deutsche Bank through a finance lease, then subsequently leased back the buildings through an operating lease. In this paper, the transaction is analysed as a case study to illustrate that tax arbitrage and accounting regulatory arbitrage are not separate considerations in the financing decision-making process. Therefore, regulators and business decision-makers cannot look at regulation in a vacuum.
Impairment of Assets: A Tax Accounting Interface
By Les Nethercott and Tony Anamourlis
The relationship between taxation law and accounting has been a complicated one in recent years. The decision of the Australian Accounting Standards Board (AASB) to adopt International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) has lent a more complex dimension to this interface. There are two important areas of taxation law where the interface of tax and accounting principles arise. They concern the issues of Thin Capitalisation and Consolidations. However, of particular concern in both of these areas is the treatment of intangible assets and their impairment. This paper seeks to examine these issues and some of the consequences of recent legislative amendments to the tax law and the adoption of IFRS.
The Insider Trading Implications of Directors' Margin Loans
By Juliette Overland
The use of margin loans by directors of listed companies to acquire shares in their own companies raises a number of important issues, not least of which are the insider trading implications. This topic has been the subject of a significant focus this year, primarily due to the release of an Issues Paper and Report on Aspects of Market Integrity by the Corporations and Markets Advisory Committee in response to a ministerial request. This article discusses the relationship between insider trading and directors' margin loans, analyses the current state of the law in the context of relevant commentary and law reform proposals, and proposes alternative mechanisms to address the complex underlying issues in light of the current policy focus.