TaxTMI 
TaxTMI 
Companies (Indian Accounting Standards) Amendment Rules, 2019
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....y uses fair value in its opening Ind AS Balance Sheet as deemed cost for an item of property, plant and equipment, an intangible asset or a right-of-use asset (see paragraphs D5 and D7), the entity's first Ind AS financial statements shall disclose, for each line item in the opening Ind AS Balance Sheet: (a) the aggregate of those fair values; and (b) the aggregate adjustment to the carrying amounts reported under previous GAAP."; (ii)for paragraph 39AB, the following paragraph shall be substituted, namely:- "39AB Ind AS 116, Leases, amended paragraphs 30, C4, D1, D7, D8B, D9 and D9AA, deleted paragraph D9A and added paragraphs D9B-D9E. An entity shall apply those amendments when it applies Ind AS 116." (iii) in Appendix C, in paragraph C4, for item (f), the following item shall be substituted, namely:- "(f) If an asset acquired, or liability assumed, in a past business combination was not recognised in accordance with previous GAAP, it does not have a deemed cost of zero in the opening Ind AS Balance Sheet. Instead, the acquirer shall recognise and measure it in its consolidated Balance Sheet on the basis that Ind ASs would require in the ....
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....o customers for goods or services and that framework is subject to oversight and/or approval by a rate regulator (as defined in Ind AS 114, Regulatory Deferral Accounts)."; (d) for paragraph D9, the following paragraph shall be substituted, namely:- "D9 A first-time adopter may assess whether a contract existing at the date of transition to Ind ASs contains a lease by applying paragraphs 9-11 of Ind AS 116 to those contracts on the basis of facts and circumstances existing at that date."; (e) paragraph D9A shall be omitted; (f) for paragraph D9AA, the following paragraph shall be substituted, namely:- "D9AA When a lease includes both land and building elements, a first time adopter lessor may assess the classification of each element as finance or an operating lease at the date of transition to Ind ASs on the basis of the facts and circumstances existing as at that date."; (g) after paragraph D9AA, the following paragraph shall be inserted, namely:- "D9B When a first-time adopter that is a lessee recognises lease liabilities and right-of-use assets, it may apply the following approach to all of its leases (subject to th....
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....e lease term if the contract contains options to extend or terminate the lease. D9E Lease payments, lessee, lessee's incremental borrowing rate, commencement date of the lease, initial direct costs and lease term are defined terms in Ind AS 116 and are used in this Standard with the same meaning."; (v) In Appendix 1, (a) for paragraph 12, the following paragraph shall be substituted, namely:- "12. Following paragraph numbers appear as 'deleted' in IFRS 1. In order to maintain consistency with paragraph numbers of IFRS 1, the paragraph numbers are retained in Ind AS 101: (i) Paragraph 19 (ii) Paragraph D1(e) (iii) Paragraph D1(o) (iv) Paragraphs D9A and D9C (v)Paragraphs D10-11 (vi) Paragraph D24 (vii)Paragraph D31"; (b) for paragraphs 13 and 14, the following paragraphs shall be substituted, namely:- "13. IAS 40, Investment Property permits both cost model and fair value model (except in some situations) for measurement of investment properties after initial recognition. Ind AS 40, Investment Property, permits only the cost model. As a consequence, paragraph 30 is am....
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....; (v) in Appendix B, (a) paragraphs B28, B29 and B30 along with the heading 'Operating leases' shall be omitted; (b) paragraph B32(a) shall be omitted; (c) for paragraph B42, the following paragraphs shall be substituted, namely:- "B42 In measuring the acquisition-date fair value of an asset such as a building or a patent that is subject to an operating lease in which the acquiree is the lessor, the acquirer shall take into account the terms of the lease. The acquirer does not recognise a separate asset or liability if the terms of an operating lease are either favourable or unfavourable when compared with market terms."; (vi) in Appendix 1, (a) for paragraph 5, the following paragraphs shall be substituted, namely:- "5 Paragraphs 64-64J and 64L related to effective date have not been included in Ind AS 103 as these are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IFRS 3, these paragraph numbers are retained in Ind AS 103. 6. The following paragraph numbers appear as 'Deleted' in IFRS 3. In order to maintain consistency with paragraph numbers of Ind AS 103, th....
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....xt. Paragraphs 43-44BB related to effective date and transition given in IFRS 7 have not been given in Ind AS 107 since it is not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IFRS 7, these paragraph numbers are retained in Ind AS 107. ". V. in "Indian Accounting Standard (Ind AS) 109", - (i) in paragraph 2.1, for item (b), the following item shall be substituted, namely:- "(b) rights and obligations under leases to which Ind AS 116, Leases applies. However: (i) finance lease receivables (i.e. net investments in finance leases) and operating lease receivables recognised by a lessor are subject to the derecognition and impairment requirements of this Standard; (ii) lease liabilities recognised by a lessee are subject to the derecognition requirements in paragraph 3.3.1 of this Standard; and (iii) derivatives that are embedded in leases are subject to the embedded derivatives requirements of this Standard. "; (ii) in paragraph 5.5.15, for item (b), the following item shall be substituted, namely:- "(b) lease receivables that result from transactions that are within the scope of Ind....
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....hen it applies Ind AS 116." Appendix D References to matters contained in other Indian Accounting Standards This appendix is an integral part of the Ind AS. This appendix lists the appendices which are part of other Indian Accounting Standards and make reference to Ind AS 113, Fair Value Measurement. 1. Appendix A, Distributions of Non-cash Assets to Owners contained in Ind AS 10, Events after the Reporting Period. 2. Appendix D, Extinguishing Financial Liabilities with Equity Instruments contained in Ind AS 109, Financial Instruments."; (iii) in Appendix 1, after paragraph 2, the following paragraph shall be inserted, namely:- "3. Paragraphs C1-C5 of IFRS 13 have not been included in Ind AS 113 as these paragraphs relate to effective date and transition which are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IFRS 13, these paragraph numbers are retained in Ind AS 113.". VII. in "Indian Accounting Standard (Ind AS) 115", - (i) in paragraph 5, for item (a), the following item shall be substituted, namely:- "(a) lease contracts within the scope of Ind....
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....plies Ind AS 116."; (v) in Appendix D, for paragraph AG8, the following paragraph shall be substituted, namely:- "AG8 The operator may have a right to use the separable infrastructure described in paragraph AG7(a), or the facilities used to provide ancillary unregulated services described in paragraph AG7(b). In either case, there may in substance be a lease from the grantor to the operator; if so, it shall be accounted for in accordance with Ind AS 116."; (vi) in Appendix E, for paragraph 5, the following paragraph shall be substituted, namely:- "5. Certain aspects and disclosures relating to some service concession arrangements are addressed by Indian Accounting Standards (eg Ind AS 16 applies to acquisitions of items of property, plant and equipment, Ind AS 116 applies to leases of assets, and Ind AS 38 applies to acquisitions of intangible assets). However, a service concession arrangement may involve executory contracts that are not addressed in Indian Accounting Standards, unless the contracts are onerous, in which case Ind AS 37 applies. Therefore, this Appendix addresses additional disclosures of service concession arrangements."; (vii) in Appendi....
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....; and (e) rights held by a lessee under licensing agreements within the scope of Ind AS 38, Intangible Assets, for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights. 4 A lessee may, but is not required to, apply this Standard to leases of intangible assets other than those described in paragraph 3(e). Recognition exemptions (paragraphs B3-B8)____________________________________ 5 A lessee may elect not to apply the requirements in paragraphs 22-49 to: (a) short-term leases; and (b) leases for which the underlying asset is of low value (as described in paragraphs B3-B8). 6 If a lessee elects not to apply the requirements in paragraphs 22-49 to either short-term leases or leases for which the underlying asset is of low value, the lessee shall recognise the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis. The lessee shall apply another systematic basis if that basis is more representative of the pattern of the lessee's benefit. 7 If a lessee accounts for short-term leases applying paragraph 6, the lessee shall consider the lea....
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....te the stand-alone price, maximising the use of observable information. 15 As a practical expedient, a lessee may elect, by class of underlying asset, not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component. A lessee shall not apply this practical expedient to embedded derivatives that meet the criteria in paragraph 4.3.3 of Ind AS 109, Financial Instruments. 16 Unless the practical expedient in paragraph 15 is applied, a lessee shall account for non-lease components applying other applicable Standards. Lessor 17 For a contract that contains a lease component and one or more additional lease or non-lease components, a lessor shall allocate the consideration in the contract applying paragraphs 73-90 of Ind AS 115. Lease term (paragraphs B34-B41)_____________________________________________ 18 An entity shall determine the lease term as the non-cancellable period of a lease, together with both: (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and (b) periods covered by an option to....
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....sts incurred by the lessee; and (d) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The lessee incurs the obligation for those costs either at the commencement date or as a consequence of having used the underlying asset during a particular period. 25 A lessee shall recognise the costs described in paragraph 24(d) as part of the cost of the right-of-use asset when it incurs an obligation for those costs. A lessee applies Ind AS 2, Inventories, to costs that are incurred during a particular period as a consequence of having used the right-of-use asset to produce inventories during that period. The obligations for such costs accounted for applying this Standard or Ind AS 2 are recognised and measured applying Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets. Initial measurement of the lease liability 26 At the commencement date, a lessee shall measure the lease liability at the present value of the lease p....
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....chase option, the lessee shall depreciate the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the lessee shall depreciate the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. 33 A lessee shall apply Ind AS 36, Impairment of Assets, to determine whether the right-of-use asset is impaired and to account for any impairment loss identified. Other measurement models 34 [Refer Appendix 1]. 35 If right-of-use assets relate to a class of property, plant and equipment to which the lessee applies the revaluation model in Ind AS 16, a lessee may elect to apply that revaluation model to all of the right-of-use assets that relate to that class of property, plant and equipment. Subsequent measurement of the lease liability 36 After the commencement date, a lessee shall measure the lease liability by: (a) increasing the carrying amount to reflect interest on the lease liability; (b) reducing the carrying amount to reflect the lease payments made; and (c) remeasuring the carrying amount to reflect any reassessme....
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....icit in the lease cannot be readily determined. 42 A lessee shall remeasure the lease liability by discounting the revised lease payments, if either: (a) there is a change in the amounts expected to be payable under a residual value guarantee. A lessee shall determine the revised lease payments to reflect the change in amounts expected to be payable under the residual value guarantee. (b) there is a change in future lease payments resulting from a change in an index or a rate used to determine those payments, including for example a change to reflect changes in market rental rates following a market rent review. The lessee shall remeasure the lease liability to reflect those revised lease payments only when there is a change in the cash flows (ie when the adjustment to the lease payments takes effect). A lessee shall determine the revised lease payments for the remainder of the lease term based on the revised contractual payments. 43 In applying paragraph 42, a lessee shall use an unchanged discount rate, unless the change in lease payments results from a change in floating interest rates. In that case, the lessee shall use a revised discount rate that reflects changes ....
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....se liabilities separately in the balance sheet, the lessee shall disclose which line items in the balance sheet include those liabilities. 48 The requirement in paragraph 47(a) does not apply to right-of-use assets that meet the definition of investment property, which shall be presented in the balance sheet as investment property. 49 In the statement of profit and loss, a lessee shall present interest expense on the lease liability separately from the depreciation charge for the right-of-use asset. Interest expense on the lease liability is a component of finance costs, which paragraph 82(b) of Ind AS 1, Presentation of Financial Statements, requires to be presented separately in the statement of profit and loss. 50 In the statement of cash flows, a lessee shall classify: (a) cash payments for the principal portion of the lease liability within financing activities; (b) cash payments for the interest portion of the lease liability within financing activities applying the requirements in Ind AS 7, Statement of Cash Flows, for interest paid; and (c) short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the me....
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.... at the end of the reporting period is dissimilar to the portfolio of short-term leases to which the short-term lease expense disclosed applying paragraph 53(c) relates. 56 If right-of-use assets meet the definition of investment property, a lessee shall apply the disclosure requirements in Ind AS 40. In that case, a lessee is not required to provide the disclosures in paragraph 53(a), (f), (h) or (j) for those right-of-use assets. 57 If a lessee measures right-of-use assets at revalued amounts applying Ind AS 16, the lessee shall disclose the information required by paragraph 77 of Ind AS 16 for those right-of-use assets. 58 A lessee shall disclose a maturity analysis of lease liabilities applying paragraphs 39 and B11 of Ind AS 107, Financial Instruments: Disclosures, separately from the maturity analyses of other financial liabilities. 59 In addition to the disclosures required in paragraphs 53-58, a lessee shall disclose additional qualitative and quantitative information about its leasing activities necessary to meet the disclosure objective in paragraph 51 (as described in paragraph B48). This additional information may include, but is not limited to, information ....
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.... without major modifications. 64 Indicators of situations that individually or in combination could also lead to a lease being classified as a finance lease are: (a) if the lessee can cancel the lease, the lessor's losses associated with the cancellation are borne by the lessee; (b) gains or losses from the fluctuation in the fair value of the residual accrue to the lessee (for example, in the form of a rent rebate equaling most of the sales proceeds at the end of the lease); and (c) the lessee has the ability to continue the lease for a secondary period at a rent that is substantially lower than market rent. 65 The examples and indicators in paragraphs 63-64 are not always conclusive. If it is clear from other features that the lease does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset, the lease is classified as an operating lease. For example, this may be the case if ownership of the underlying asset transfers at the end of the lease for a variable payment equal to its then fair value, or if there are variable lease payments, as a result of which the lessor does not transfer substantially all such risks and rewar....
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....ably certain to exercise that option (assessed considering the factors described in paragraph B37); and (e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. Manufacturer or dealer lessors 71 At the commencement date, a manufacturer or dealer lessor shall recognise the following for each of its finance leases: (a) revenue being the fair value of the underlying asset, or, if lower, the present value of the lease payments accruing to the lessor, discounted using a market rate of interest; (b) the cost of sale being the cost, or carrying amount if different, of the underlying asset less the present value of the unguaranteed residual value; and (c) selling profit or loss (being the difference between revenue and the cost of sale) in accordance with its policy for outright sales to which Ind AS 115 applies. A manufacturer or dealer lessor shall recognise selling profit or loss on a finance lease at the commencement date, regardless of whether the lessor transfers the underlying asset as described in Ind AS 115. 72 Manufacturers or dealers often offer to customers the choice of either b....
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....with that Standard. Lease modifications 79 A lessor shall account for a modification to a finance lease as a separate lease if both: (a) the modification increases the scope of the lease by adding the right to use one or more underlying assets; and (b) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract. 80 For a modification to a finance lease that is not accounted for as a separate lease, a lessor shall account for the modification as follows: (a) if the lease would have been classified as an operating lease had the modification been in effect at the inception date, the lessor shall: (i) account for the lease modification as a new lease from the effective date of the modification; and (ii) measure the carrying amount of the underlying asset as the net investment in the lease immediately before the effective date of the lease modification. (b) otherwise, the lessor shall apply the requirements of Ind AS 109. Operating leases Recognition and measurement 8....
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....ase payments not included in the measurement of the net investment in the lease. (b) for operating leases, lease income, separately disclosing income relating to variable lease payments that do not depend on an index or a rate. 91 A lessor shall provide the disclosures specified in paragraph 90 in a tabular format, unless another format is more appropriate. 92 A lessor shall disclose additional qualitative and quantitative information about its leasing activities necessary to meet the disclosure objective in paragraph 89. This additional information includes, but is not limited to, information that helps users of financial statements to assess: (a) the nature of the lessor's leasing activities; and (b) how the lessor manages the risk associated with any rights it retains in underlying assets. In particular, a lessor shall disclose its risk management strategy for the rights it retains in underlying assets, including any means by which the lessor reduces that risk. Such means may include, for example, buy-back agreements, residual value guarantees or variable lease payments for use in excess of specified limits. Finance leases 93 A lessor shall provide a qualita....
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....essee shall measure the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained by the seller-lessee. Accordingly, the seller-lessee shall recognise only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. (b) the buyer-lessor shall account for the purchase of the asset applying applicable Standards, and for the lease applying the lessor accounting requirements in this Standard. 101 If the fair value of the consideration for the sale of an asset does not equal the fair value of the asset, or if the payments for the lease are not at market rates, an entity shall make the following adjustments to measure the sale proceeds at fair value: (a) any below-market terms shall be accounted for as a prepayment of lease payments; and (b) any above-market terms shall be accounted for as additional financing provided by the buyer-lessor to the seller-lessee. 102 The entity shall measure any potential adjustment required by paragraph 101 on the basis of the more readily determinable of: (a) the difference between the fair value of the consideratio....
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....cept for such costs incurred by a manufacturer or dealer lessor in connection with a finance lease. interest rate implicit in the lease The rate of interest that causes the present value of (a) the lease payments and (b) the unguaranteed residual value to equal the sum of (i) the fair value of the underlying asset and (ii) any initial direct costs of the lessor. Lease A contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. lease incentives Payments made by a lessor to a lessee associated with a lease, or the reimbursement or assumption by a lessor of costs of a lessee. Lease Modification A change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease(for example, adding or terminating the right to use one or more underlying assets, or extending or shortening the contractual lease term). lease payments Payments made by a lessee to a lessor relating to the right to use an underlying asset during the lease term, comprising the following: (a) fixed payments (including in-substance fixed p....
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....ed in the lease term. period of use The total period of time that an asset is used to fulfil a contract with a customer (including any non-consecutive periods of time). residual value Guarantee A guarantee made to a lessor by a party unrelated to the lessor that the value (or part of the value) of an underlying asset at the end of a lease will be at least a specified amount. right-of-use asset An asset that represents a lessee's right to use an underlying asset for the lease term. short-term lease A lease that, at the commencement date, has a lease term of 12 months or less. A lease that contains a purchase option is not a short-term lease. Sublease A transaction for which an underlying asset is re-leased by a lessee ('intermediate lessor') to a third party, and the lease('head lease') between the head lessor and lessee remains in effect. underlying asset An asset that is the subject of a lease, for which the right to use that asset has been provided by a lessor to a lessee. unearned finance income The difference between: (a) the gross investment in the lease; and (b) the net investment in the lease. unguaranteed residual value ....
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....raph B32. Recognition exemption: leases for which the underlying asset is of low value (paragraphs 5-8) B3 Except as specified in paragraph B7, this Standard permits a lessee to apply paragraph 6 to account for leases for which the underlying asset is of low value. A lessee shall assess the value of an underlying asset based on the value of the asset when it is new, regardless of the age of the asset being leased. B4 The assessment of whether an underlying asset is of low value is performed on an absolute basis. Leases of low-value assets qualify for the accounting treatment in paragraph 6 regardless of whether those leases are material to the lessee. The assessment is not affected by the size, nature or circumstances of the lessee. Accordingly, different lessees are expected to reach the same conclusions about whether a particular underlying asset is of low value. B5 An underlying asset can be of low value only if: (a) the lessee can benefit from use of the underlying asset on its own or together with other resources that are readily available to the lessee; and (b) the underlying asset is not highly dependent on, or highly interrelated with, other assets. B6 ....
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....od of use. A supplier's right to substitute an asset is substantive only if both of the following conditions exist: (a) the supplier has the practical ability to substitute alternative assets throughout the period of use (for example, the customer cannot prevent the supplier from substituting the asset and alternative assets are readily available to the supplier or could be sourced by the supplier within a reasonable period of time); and (b) the supplier would benefit economically from the exercise of its right to substitute the asset (ie the economic benefits associated with substituting the asset are expected to exceed the costs associated with substituting the asset). B15 If the supplier has a right or an obligation to substitute the asset only on or after either a particular date or the occurrence of a specified event, the supplier's substitution right is not substantive because the supplier does not have the practical ability to substitute alternative assets throughout the period of use. B16 An entity's evaluation of whether a supplier's substitution right is substantive is based on facts and circumstances at inception of the contract and shall exclude consideratio....
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.... or indirectly in many ways, such as by using, holding or sub-leasing the asset. The economic benefits from use of an asset include its primary output and by-products (including potential cash flows derived from these items), and other economic benefits from using the asset that could be realised from a commercial transaction with a third party. B22 When assessing the right to obtain substantially all of the economic benefits from use of an asset, an entity shall consider the economic benefits that result from use of the asset within the defined scope of a customer's right to use the asset (see paragraph B30). For example: (a) if a contract limits the use of a motor vehicle to only one particular territory during the period of use, an entity shall consider only the economic benefits from use of the motor vehicle within that territory, and not beyond. (b) if a contract specifies that a customer can drive a motor vehicle only up to a particular number of miles during the period of use, an entity shall consider only the economic benefits from use of the motor vehicle for the permitted mileage, and not beyond. B23 If a contract requires a customer to pay the supplier or ano....
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....hat, depending on the circumstances, grant the right to change how and for what purpose the asset is used, within the defined scope of the customer's right of use, include: (a) rights to change the type of output that is produced by the asset (for example, to decide whether to use a shipping container to transport goods or for storage, or to decide upon the mix of products sold from retail space); (b) rights to change when the output is produced (for example, to decide when an item of machinery or a power plant will be used); (c) rights to change where the output is produced (for example, to decide upon the destination of a truck or a ship, or to decide where an item of equipment is used); and (d) rights to change whether the output is produced, and the quantity of that output (for example, to decide whether to produce energy from a power plant and how much energy to produce from that power plant). B27 Examples of decision-making rights that do not grant the right to change how and for what purpose the asset is used include rights that are limited to operating or maintaining the asset. Such rights can be held by the customer or the supplier. Although rights such as t....
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..... B31 The following flowchart may assist entities in making the assessment of whether a contract is, or contains, a lease. Separating components of a contract (paragraphs 12-17) B32 The right to use an underlying asset is a separate lease component if both: (a) the lessee can benefit from use of the underlying asset either on its own or together with other resources that are readily available to the lessee. Readily available resources are goods or services that are sold or leased separately (by the lessor or other suppliers) or resources that the lessee has already obtained (from the lessor or from other transactions or events); and (b) the underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract. For example, the fact that a lessee could decide not to lease the underlying asset without significantly affecting its rights to use other underlying assets in the contract might indicate that the underlying asset is not highly dependent on, or highly interrelated with, those other underlying assets. B33 A contract may include an amount payable by the lessee for activities and costs that do not transfer a ....
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....al periods (for example, a purchase option that is exercisable at the end of an extension period at a rate that is currently below market rates). (b) significant leasehold improvements undertaken (or expected to be undertaken) over the term of the contract that are expected to have significant economic benefit for the lessee when the option to extend or terminate the lease, or to purchase the underlying asset, becomes exercisable; (c) costs relating to the termination of the lease, such as negotiation costs, relocation costs, costs of identifying another underlying asset suitable for the lessee's needs, costs of integrating a new asset into the lessee's operations, or termination penalties and similar costs, including costs associated with returning the underlying asset in a contractually specified condition or to a contractually specified location; (d) the importance of that underlying asset to the lessee's operations, considering, for example, whether the underlying asset is a specialised asset, the location of the underlying asset and the availability of suitable alternatives; and (e) conditionality associated with exercising the option (ie when the option can be exe....
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....minate the lease, or to purchase the underlying asset, becomes exercisable; (b) a significant modification to, or customisation of, the underlying asset that was not anticipated at the commencement date; (c) the inception of a sublease of the underlying asset for a period beyond the end of the previously determined lease term; and (d) a business decision of the lessee that is directly relevant to exercising, or not exercising, an option (for example, a decision to extend the lease of a complementary asset, to dispose of an alternative asset or to dispose of a business unit within which the right-of-use asset is employed). In-substance fixed lease payments (paragraphs 27(a), 36(c) and 70(a)) B42 Lease payments include any in-substance fixed lease payments. In-substance fixed lease payments are payments that may, in form, contain variability but that, in substance, are unavoidable. In-substance fixed lease payments exist, for example, if: (a) payments are structured as variable lease payments, but there is no genuine variability in those payments. Those payments contain variable clauses that do not have real economic substance. Examples of those types of payments in....
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....ansaction is a sale and leaseback transaction that is accounted for applying paragraphs 98-103. B47 However, if the lessee does not obtain control of the underlying asset before the asset is transferred to the lessor, the transaction is not a sale and leaseback transaction. For example, this may be the case if a manufacturer, a lessor and a lessee negotiate a transaction for the purchase of an asset from the manufacturer by the lessor, which is in turn leased to the lessee. The lessee may obtain legal title to the underlying asset before legal title transfers to the lessor. In this case, if the lessee obtains legal title to the underlying asset but does not obtain control of the asset before it is transferred to the lessor, the transaction is not accounted for as a sale and leaseback transaction, but as a lease. Lessee disclosures (paragraph 59) B48 In determining whether additional information about leasing activities is necessary to meet the disclosure objective in paragraph 51, a lessee shall consider: (a) whether that information is relevant to users of financial statements. A lessee shall provide additional information specified in paragraph 59 only if that informa....
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....iabilities; and (d) other operational and financial effects of those options. B51 Additional information relating to residual value guarantees that, depending on the circumstances, may be needed to satisfy the disclosure objective in paragraph 51 could include information that helps users of financial statements to assess, for example: (a) the lessee's reasons for providing residual value guarantees and the prevalence of those guarantees; (b) the magnitude of a lessee's exposure to residual value risk; (c) the nature of underlying assets for which those guarantees are provided; and (d) other operational and financial effects of those guarantees. B52 Additional information relating to sale and leaseback transactions that, depending on the circumstances, may be needed to satisfy the disclosure objective in paragraph 51 could include information that helps users of financial statements to assess, for example: (a) the lessee's reasons for sale and leaseback transactions and the prevalence of those transactions; (b) key terms and conditions of individual sale and leaseback transactions; (c) payments not included in the measurement of lease liabilities; and ....
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....2-66 and B53-B54. In such a case, a lessor shall regard the economic life of the buildings as the economic life of the entire underlying asset. Sublease classification B58 In classifying a sublease, an intermediate lessor shall classify the sublease as a finance lease or an operating lease as follows: (a) if the head lease is a short-term lease that the entity, as a lessee, has accounted for applying paragraph 6, the sublease shall be classified as an operating lease. (b) otherwise, the sublease shall be classified by reference to the right-of-use asset arising from the head lease, rather than by reference to the underlying asset (for example, the item of property, plant or equipment that is the subject of the lease). Appendix C Effective date and transition This appendix is an integral part of the Standard and has the same authority as the other parts of the Standard. Effective date_______________________________________________________________ C1 An entity shall apply this Standard for annual reporting periods beginning on or after 1st April, 2019. Transition__________________________________________________________________ C2 For the purposes of ....
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....tion. (c) recognise a right-of-use asset at the date of initial application for leases previously classified as an operating lease applying Ind AS 17. The lessee shall choose, on a lease-by-lease basis, to measure that right-of-use asset at either: (i) its carrying amount as if the Standard had been applied since the commencement date, but discounted using the lessee's incremental borrowing rate at the date of initial application; or (ii) an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet immediately before the date of initial application. (d) apply Ind AS 36, Impairment of Assets, to right-of-use assets at the date of initial application, unless the lessee applies the practical expedient in paragraph C10(b). C9 Notwithstanding the requirements in paragraph C8, for leases previously classified as operating leases applying Ind AS 17, a lessee: (a) is not required to make any adjustments on transition for leases for which the underlying asset is of low value (as described in paragraphs B3-B8) that will be accounted for applying paragraph 6. The les....
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....pplying Ind AS 17. For those leases, a lessee shall account for the right-of-use asset and the lease liability applying this Standard from the date of initial application. Disclosure C12 If a lessee elects to apply this Standard in accordance with paragraph C5(b), the lessee shall disclose information about initial application required by paragraph 28 of Ind AS 8, except for the information specified in paragraph 28(f) of Ind AS 8. Instead of the information specified in paragraph 28(f) of Ind AS 8, the lessee shall disclose: (a) the weighted average lessee's incremental borrowing rate applied to lease liabilities recognised in the balance sheet at the date of initial application; and (b) an explanation of any difference between: (i) operating lease commitments disclosed applying Ind AS 17 at the end of the annual reporting period immediately preceding the date of initial application, discounted using the incremental borrowing rate at the date of initial application as described in paragraph C8(a); and (ii) lease liabilities recognised in the balance sheet at the date of initial application. C13 If a lessee uses one or more of the specified practica....
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.... operating lease acquired as part of a business combination, the lessee shall derecognise that asset or liability and adjust the carrying amount of the right-of-use asset by a corresponding amount at the date of initial application. C20 [Refer Appendix 1] Withdrawal of other Standards________________________________________________ C21 This Standard supersedes Ind AS 17, Leases. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 116 and the corresponding International Financial Reporting Standard (IFRS) 16, Leases, issued by the International Accounting Standards Board. Comparison with IFRS 16, Leases 1. With regard to subsequent measurement, paragraph 34 of IFRS 16 provides that if lessee applies fair value model in IAS 40 to its investment property, it shall apply that fair value model to the right-of-use assets that meet the definition of investment property. Since Ind AS 40, Investment Property, does not allow the use of fair value model, paragraph 34 has been deleted in Ind AS 116. Accordingly, reference ....
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....tuted, namely:- "12 The costs of conversion of inventories include costs directly related to the units of production, such as direct labour. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. Fixed production overheads are those indirect costs of production that remain relatively constant regardless of the volume of production, such as depreciation and maintenance of factory buildings, equipment and right-of-use assets used in the production process, and the cost of factory management and administration. Variable production overheads are those indirect costs of production that vary directly, or nearly directly, with the volume of production, such as indirect materials and indirect labour."; (ii)after paragraph 40E, the following paragraphs shall be inserted, namely:- "40F Omitted * 40G Ind AS 116 amended paragraph 12. An entity shall apply that amendment when it applies Ind AS 116."; (iii) in Appendix 1, for paragraph 3, the following shall be substituted, namely:- "3 Paragraphs 40-40D and 40F related to effective date have not been included in ....
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....ase is a temporary difference and gives rise to a deferred tax liability or asset. This is true even if: (a) the entity does not intend to dispose of the asset. In such cases, the revalued carrying amount of the asset will be recovered through use and this will generate taxable income which exceeds the depreciation that will be allowable for tax purposes in future periods; or (b) tax on capital gains is deferred if the proceeds of the disposal of the asset are invested in similar assets. In such cases, the tax will ultimately become payable on sale or use of the similar assets."; (ii) for paragraph 98G, the following paragraph shall be substituted, namely:- "98G Ind AS 116 amended paragraph 20. An entity shall apply that amendment when it applies Ind AS 116. 98H Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to Ind AS 12) amended paragraph 29 and added paragraphs 27A, 29A and 89-98F and the example following paragraph 26. An entity shall apply those amendments for annual periods beginning on or after April 01, 2018. An entity shall apply those amendments retrospectively in accordance with Ind AS 8, Accounting Policies, Ch....
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....e item is derecognised (unless Ind AS 116, Leases, requires otherwise on a sale and leaseback). Gains shall not be classified as revenue. 69. The disposal of an item of property, plant and equipment may occur in a variety of ways (eg by sale, by entering into a finance lease or by donation). The date of disposal of an item of property, plant and equipment is the date the recipient obtains control of that item in accordance with the requirements for determining when a performance obligation is satisfied in Ind AS 115. Ind AS 116 applies to disposal by a sale and leaseback. "; (vii) after paragraph 81J, the following paragraph shall be inserted, namely:- "81K Omitted* 81L Ind AS 116 deleted paragraphs 4 and 27 and paragraph 3 of Appendix C and amended paragraphs 5, 10, 44, 68-69 and paragraph 2 of Appendix A. An entity shall apply those amendments when it applies Ind AS 116."; (viii) in Appendix A, in paragraph 2, for item (a), the following item shall be substituted, namely:- "(a) recognised as part of the cost of an item of property, plant and equipment in accordance with Ind AS 16 or as part of the cost of a right-of-use asset in accordanc....
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....i) after paragraph 57, the following paragraphs shall be inserted, namely:- "Effective date and transition_________________________________________________ 58-60J Omitted* 60K Ind AS 116 amended paragraph 16. An entity shall apply that amendment when it applies Ind AS 116."; (iii) in Appendix 1, after paragraph 4, the following paragraph shall be inserted, namely:- "5. Paragraphs 58-60J of IAS 21 have not been included in Ind AS 21 as these paragraphs relate to Effective date and transition. However, in order to maintain consistency with paragraph numbers of IAS 21, these paragraph numbers are retained in Ind AS 21.". XVI. in "Indian Accounting Standard (Ind AS) 23", - (i) in paragraph 6, for item (d), the following item shall be substituted, namely:- "(d) interest in respect of lease liabilities recognised in accordance with Ind AS 116, Leases; and"; (ii) after paragraph 26, the following paragraphs shall be inserted, namely:- "Transitional provisions______________________________________________________ 27-28 Omitted* Effective date_______________________________________________________________ 29-29B Omitted* 29C ....
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....s an opportunity to generate an inflow of cash or another financial asset, but it does not give rise to a present right to receive cash or another financial asset. "; (iii)in Appendix 1, for paragraph 2, the following paragraph shall be substituted, namely:- "2. Paragraphs 96-97P and 97R related to Transitional Provisions and Effective date given in IAS 32 have not been given in Ind AS 32, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards and paragraphs related to Effective date are not relevant in Indian context. However, in order to maintain consistency with paragraph numbers of IAS 32, these paragraph numbers are retained in Ind AS 32. ". XVIII. in "Indian Accounting Standard (Ind AS) 37", - (i) in paragraph 5, for item (c), the following item shall be substituted, namely:- "(c) leases (see Ind AS 116, Leases). However, this Standard applies to any lease that becomes onerous before the commencement date of the lease as defined in Ind AS 116. T....
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....e asset may occur in a variety of ways (e.g. by sale, by entering into a finance lease, or by donation). The date of disposal of an intangible asset is the date that the recipient obtains control of that asset in accordance with the requirements for determining when a performance obligation is satisfied in Ind AS 115, Revenue from Contracts with Customers. Ind AS 116 applies to disposal by a sale and leaseback."; (iv) after paragraph 130K, the following paragraph shall be inserted, namely:- "130L Ind AS 116 amended paragraphs 3, 6, 113 and 114. An entity shall apply those amendments when it applies Ind AS 116."; (v) in Appendix A, for paragraph 6, the following paragraph shall be substituted, namely:- "6. Ind AS 38 does not apply to intangible assets held by an entity for sale in the ordinary course of business (see Ind AS 2 and Ind AS 115) or leases of intangible assets accounted for in accordance with Ind AS 116. Accordingly, this Appendix does not apply to expenditure on the development or operation of a web site (or web site software) for sale to another entity or that is accounted for in accordance with Ind AS 116."; (vi) in Appendix B, paragraph 3 s....
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....namely:- "16 An owned investment property shall be recognised as an asset when, and only when: (a) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and (b) the cost of the investment property can be measured reliably."; (vii) after paragraph 19, the following paragraph shall be inserted, namely:- "19A An investment property held by a lessee as a right-of-use asset shall be recognised in accordance with Ind AS 116."; (viii) for paragraph 20, the following paragraph shall be substituted, namely:- "20 An owned investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement. "; (ix) paragraph 25 and 26 shall be omitted. (x) after paragraph 29, the following paragraph shall be inserted, namely:- "29A An investment property held by a lessee as a right-of-use asset shall be measured initially at its cost in accordance with Ind AS 116."; (xi) after paragraph 40, the following paragraph shall be inserted, namely:- "40A When a lessee measures fair value of an investment property that....
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....pplying Ind AS 116, and its related amendments to this Standard, for the first time shall apply the transition requirements in Appendix C of Ind AS 116 to its investment property held as right-of-use asset. "; (xvii) for paragraph 85F, the following paragraph shall be substituted, namely:- "85F Ind AS 116, amended the scope of Ind AS 40 by defining investment property to include both owned investment property and property held by a lessee as a right-of-use asset. Ind AS 116 amended paragraphs 5, 7, 8, 9, 16, 20, 56, 67, 69 and 74, added paragraphs 19A, 29A, 40A and 84B and its related heading and deleted paragraphs 3, 25 and 26. An entity shall apply those amendments when it applies Ind AS 116."; (xviii) in Appendix 1, (a) for paragraph 1, the following paragraph shall be substituted, namely:- "1 IAS 40 permits both cost model and fair value model (except in some situations) for measurement of investment properties after initial recognition. Ind AS 40 permits only the cost model. The following paragraphs of IAS 40 which deal with fair value model have been deleted in Ind AS 40. In order to maintain consistency with paragraph numbers of IAS 40, the p....