TaxTMI 
TaxTMI 
Leases
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....ases to explore for or use minerals, oil, natural gas and similar non-regenerative resources; (b) leases of biological assets within the scope of Ind AS 41, Agriculture, held by a lessee; (c) service concession arrangements within the scope of Appendix D, Service Concession Arrangements, of Ind AS 115, Revenue from Contracts with Customer; (d) licences of intellectual property granted by a lessor within the scope of Ind AS 115, Revenue from Contracts with Customers; 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 underlyin....
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....and-alone price of the non-lease components. 14 The relative stand-alone price of lease and non-lease components shall be determined on the basis of the price the lessor, or a similar supplier, would charge an entity for that component, or a similar component, separately. If an observable stand-alone price is not readily available, the lessee shall estimate 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....
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....surement of the lease liability, as described in paragraph 26; (b) any lease payments made at or before the commencement date, less any lease incentives received; (c) any initial direct costs 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 Liabi....
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.... the underlying asset to the lessee by the end of the lease term or if the cost of the right-of-use asset reflects that the lessee will exercise a purchase 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)....
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....ly determined, or the lessee's incremental borrowing rate at the date of reassessment, if the interest rate implicit 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 fl....
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.... only if all of the following conditions are met:- (a) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; 6[(b) any reduction in lease payments affects only payments originally due on or before the 30th June, 2022 (for example, a rent concession would meet this condition if it results in reduced lease payments on or before the 30th June, 2022 and increased lease payments that extend beyond the 30th June, 2022); and] (c) there is no substantive change to other terms and conditions of the lease.] Presentation 47 A lessee shall either present in the balance sheet, or disclose in the notes: (a) right-of-use assets separately from other assets. If a lessee does not present right-of-use assets separately in the balance sheet, the lessee shall: (i) include right-of-use assets within the same line item as that within which the corresponding underlying assets would be presented if they were owned; and (ii) disclose which line items in the balance sheet include those right-of-use assets. (b) lease liabilities separately from other liabiliti....
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....raph 6. This expense need not include the expense relating to leases with a lease term of one month or less; (d) the expense relating to leases of low-value assets accounted for applying paragraph 6. This expense shall not include the expense relating to short-term leases of low-value assets included in paragraph 53(c); (e) the expense relating to variable lease payments not included in the measurement of lease liabilities; (f) income from subleasing right-of-use assets; (g) total cash outflow for leases; (h) additions to right-of-use assets; (i) gains or losses arising from sale and leaseback transactions; and (j) the carrying amount of right-of-use assets at the end of the reporting period by class of underlying asset. 54 A lessee shall provide the disclosures specified in paragraph 53 in a tabular format, unless another format is more appropriate. The amounts disclosed shall include costs that a lessee has included in the carrying amount of another asset during the reporting period. 55 A lessee shall disclose the amount of its lease commitments for short-term leases accounted for applying paragraph 6 if the portfolio of short-term leases to which it is committed at the ....
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....rofit or loss for the reporting period to reflect changes in lease payments that arise from rent concessions to which the lessee has applied the practical expedient in paragraph 46A.] Lessor Classification of leases (paragraphs B53-B58) 61 A lessor shall classify each of its leases as either an operating lease or a finance lease. 62 A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. 63 Whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than the form of the contract. Examples of situations that individually or in combination would normally lead to a lease being classified as a finance lease are: (a) the lease transfers ownership of the underlying asset to the lessee by the end of the lease term; (b) the lessee has the option to purchase the underlying asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable fo....
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..... In the case of a sublease, if the interest rate implicit in the sublease cannot be readily determined, an intermediate lessor may use the discount rate used for the head lease (adjusted for any initial direct costs associated with the sublease) to measure the net investment in the sublease. 69 Initial direct costs, other than those incurred by manufacturer or dealer lessors, are included in the initial measurement of the net investment in the lease and reduce the amount of income recognised over the lease term. The interest rate implicit in the lease is defined in such a way that the initial direct costs are included automatically in the net investment in the lease; there is no need to add them separately. Initial measurement of the lease payments included in the net investment in the lease 70 At the commencement date, the lease payments included in the measurement of the net investment in the lease comprise the following payments for the right to use the underlying asset during the lease term that are not received at the commencement date: (a) fixed payments (including in-substance fixed payments as described in paragraph B42), less any lease incentives payable; (b) variabl....
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....e costs incurred in connection with obtaining a finance lease at the commencement date because they are mainly related to earning the manufacturer or dealer's selling profit. Costs incurred by manufacturer or dealer lessors in connection with obtaining a finance lease are excluded from the definition of initial direct costs and, thus, are excluded from the net investment in the lease. Subsequent measurement 75 A lessor shall recognise finance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the lessor's net investment in the lease. 76 A lessor aims to allocate finance income over the lease term on a systematic and rational basis. A lessor shall apply the lease payments relating to the period against the gross investment in the lease to reduce both the principal and the unearned finance income. 77 A lessor shall apply the derecognition and impairment requirements in Ind AS 109 to the net investment in the lease. A lessor shall review regularly estimated unguaranteed residual values used in computing the gross investment in the lease. If there has been a reduction in the estimated unguaranteed residual value, the lessor shall revise ....
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.... depreciation in accordance with Ind AS 16 and Ind AS 38. 85 A lessor shall apply Ind AS 36 to determine whether an underlying asset subject to an operating lease is impaired and to account for any impairment loss identified. 86 A manufacturer or dealer lessor does not recognise any selling profit on entering into an operating lease because it is not the equivalent of a sale. Lease modifications 87 A lessor shall account for a modification to an operating lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease. Presentation 88 A lessor shall present underlying assets subject to operating leases in its balance sheet according to the nature of the underlying asset. Disclosure 89 The objective of the disclosures is for lessors to disclose information in the notes that, together with the information provided in the balance sheet, statement of profit or loss and statement of cash flows, gives a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the l....
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....t into assets subject to operating leases and assets not subject to operating leases. Accordingly, a lessor shall provide the disclosures required by Ind AS 16 for assets subject to an operating lease (by class of underlying asset) separately from owned assets held and used by the lessor. 96 A lessor shall apply the disclosure requirements in Ind AS 36, Ind AS 38, Ind AS 40 and Ind AS 41 for assets subject to operating leases. 97 A lessor shall disclose a maturity analysis of lease payments, showing the undiscounted lease payments to be received on an annual basis for a minimum of each of the first five years and a total of the amounts for the remaining years. Sale and leaseback transactions 98 If an entity (the seller-lessee) transfers an asset to another entity (the buyer-lessor) and leases that asset back from the buyer-lessor, both the seller-lessee and the buyer-lessor shall account for the transfer contract and the lease applying paragraphs 99-103. Assessing whether the transfer of the asset is a sale 99 An entity shall apply the requirements for determining when a performance obligation is satisfied in Ind AS 115 to determine whether the transfer of an asset is accoun....
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....satisfy the requirements of Ind AS 115 to be accounted for as a sale of the asset: (a) the seller-lessee shall continue to recognise the transferred asset and shall recognise a financial liability equal to the transfer proceeds. It shall account for the financial liability applying Ind AS 109. (b) the buyer-lessor shall not recognise the transferred asset and shall recognise a financial asset equal to the transfer proceeds. It shall account for the financial asset applying Ind AS 109. 7[Temporary exception arising from interest rate benchmark reform 104 A lessee shall apply paragraphs 105-106 to all lease modifications that change the basis for det ermining future lease payments as a result of interest rate benchmark reform (see paragraphs 5.4.6 and 5.4.8 of Ind AS 109). These paragraphs apply only to such lease modifications. For this purpose, the term ‗interest rate benchmark reform' refers to the market-wide reform of an interest rate benchmark as described in paragraph 6.8.2 of Ind AS 109. 105 As a practical expedient, a lessee shall apply paragraph 42 to account for a lease modification required by interest rate benchmark reform. This practical expedient applies on....
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....nterest 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 payments), less any lease incentives; (b) variable lease payments that depend on an index or a rate; (c) the exercise pr....
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....riods 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 That portion of the residual value of the underlying asset, the realisation of which by a lessor is not assured or is guaranteed solely by a party related to the lessor. variable le....
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....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 A lease of an underlying asset does not qualify as a lease of a low-value asset if the nature of the asset is such that, when new, the asset is typically not of low value. For example, leases of cars would not qualify as leases....
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....ot 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 consideration of future events that, at inception of the contract, are not considered likely to occur. Examples of future events that, at inception of the contract, would not be considered likely to occur and, thus, should be excluded from the evaluation include: (a) an a....
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....ld 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 another party a portion of the cash flows derived from use of an asset as consideration, those cash flows paid as consideration shall be considered to be part of the economic benefits that the customer obtains from use of the asset. For example, if the customer is required to pay the supplier ....
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....ods 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 those to operate or maintain an asset are often essential to the efficient use of an asset, they are not rights to direct how and for what purpose the asset is used and are often dependent on the decisions about how and for what purpose the asset is used. However, rights to operate an asset may grant the customer the right to di....
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.... 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 good or service to the lessee. For example, a lessor may include in the total amount payable a charge for administrative tasks, or other costs it incurs associated with the lease, that do not transfer a good or service to the lessee. Such amounts payable do not give rise to a separate component of the contract, but are considered to be part of the t....
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....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 exercised only if one or more conditions are met), and the likelihood that those conditions will exist. B38 An option to extend or terminate a lease may be combined with one or more other contractual features (for example, a residual value guarantee) such that the lessee guarantees the lessor a minimum or fixed cash return that is substantially the same regardless of whether the option is ex....
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.... 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 include: (i) payments that must be made only if an asset is proven to be capable of operating during the lease, or only if an event occurs that has no genuine possibility of not occurring; or (ii) payments that are initially structured as variable lease for which the variability will be resolved at some point after the commencement date so that the payments become fixed for the remainder of the lease term. Th....
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.... 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 information is expected to be relevant to users of financial statements. In this context, this is likely to be the case if it helps those users to understand: (i) the flexibility provided by leases. Leases may provide flexibility if, for example, a lessee can reduce its exposure by exercising termination options or renewing leases with favourable terms and conditions. (ii) restrictions imposed by leases. Leases may impose restrictions, for example, by r....
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....k; (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 (d) the cash flow effect of sale and leaseback transactions in the reporting period. Lessor lease classification (paragraphs 61-66) B53 The classification of leases for lessors in this Standard is based on the extent to which the lease transfers the risks and rewards incidental to ownership of an underlying asset. Risks include the possibilities of losses from idle capacity or technological obsolescence and of variations in return because of changing economic conditions. Rewards may be represented by the expectation of p....
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....e 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. 4[C1A Covid-19-Related Rent Concessions, added paragraphs 46A, 46B, 60A, C20A and C20B. A lessee shall apply that amendment for annual reporting periods beginning on or after the April 1st, 2020. In case a lessee has not yet approved the financial statements for issue before the issuance of this amendment, then the same may be applied for annual reporting periods beginning on or after the April 1st, 2019.] 8[C1B Interest Rate Benchmark Reform-Phase 2, which amended Ind AS 109, Ind AS 107, Ind AS 104 and Ind AS 116, added paragraphs 104-106 and C20C-C20D. An entity shall apply these amendments for annual reporting periods beginning on or after the 1st April 2021. C1C Covid-19-Related Rent Concessions beyond 30 June 20....
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....to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application. Leases previously classified as operating leases C8 If a lessee elects to apply this Standard in accordance with paragraph C5(b), the lessee shall: (a) recognise a lease liability at the date of initial application for leases previously classified as an operating lease applying Ind AS 17. The lessee shall measure that lease liability at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at the date of initial application. (b) 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 ....
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.... (e) a lessee may use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease. Leases previously classified as finance leases C11 If a lessee elects to apply this Standard in accordance with paragraph C5(b), for leases that were classified as finance leases applying Ind AS 17, the carrying amount of the right-of-use asset and the lease liability at the date of initial application shall be the carrying amount of the lease asset and lease liability immediately before that date measured applying 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 balanc....
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.... any other operating lease that exists at the date of initial application; and (b) adjust the leaseback right-of-use asset for any deferred gains or losses that relate to off-market terms recognised in the balance sheet immediately before the date of initial application. Amounts previously recognised in respect of business combinations C19 If a lessee previously recognised an asset or a liability applying Ind AS 103, Business Combinations, relating to favourable or unfavourable terms of an 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] 5[Covid-19-related rent concessions for lessees C20A A lessee shall apply Covid-19-Related Rent Concessions (see paragraph C1A) retrospectively, recognising the cumulative effect of initially applying that amendment as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment. C20B In the reporting ....
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....endix D Illustrative Examples (These examples accompany, but are not part of Ind AS 116. They illustrate aspects of Ind AS 116, but are not intended to provide any interpretative guidance) Sale and leaseback transaction with fixed payments and above-market terms (The example illustrates the application of requirements in paragraph 99-102 of Ind AS 116 for a seller- lessee and a buyer-lessor). An entity (Seller-lessee) sells a building to another entity (Buyer-lessor) for cash of ₹2,000,000. Immediately before the transaction, the building is carried at a cost of ₹ 1,000,000. At the same time, Seller-lessee enters into a contract with Buyer-lessor for the right to use the building for 18 years, with annual payments of ₹120,000 payable at the end of each year. The terms and conditions of the transaction are such that the transfer of the building by Seller-lessee satisfies the requirements of Ind AS 115, Revenue from Contracts with Customers, to be accounted for as a sale of the building. Accordingly, Seller-lessee and Buyer-lessor account for the transaction as a sale and leaseback. The fair value of the building at the date of sale is ₹1,800,000. Becaus....
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....he transaction as follows. Building ₹18,00,000 Financial Asset ₹2,00,000 (18 payments of ₹16,447, discounted at 4.5 per cent per annum) Cash ₹20,00,000 After the commencement date, Buyer-lessor accounts for the lease by treating ₹103,553 of the annual payments of ₹120,000 as lease payments. The remaining ₹16,447 of annual payments received from Seller- lessee are accounted for as (a) payments received to settle the financial asset of ₹200,000 and (b) interest revenue. Subsequent measurement of a right-of-use asset and lease liability in a sale and leaseback transaction with variable lease payments that do not depend on an index or rate (The example illustrates the application of the requirements in paragraph 102A and paragraphs 29-46 of Ind AS 116 in a sale and leaseback transaction with variable lease payments that do not depend on an index or rate). An entity (Seller-lessee) sells a building to another entity (Buyer-lessor) for cash of ₹1,800,000 (the fair value of the building at the date of sale). Immediately before the transaction, the building is carried at a cost of ₹1,000,000. At the same time, Seller-les....
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....seback are: Lease Liability Right-of-use asset Year Beginning balance Lease payments(b) 3 per cent interest expense(c) Ending balance Beginning balance Depreciation charge Ending balance ₹ ₹ ₹ ₹ ₹ ₹ ₹ 1 450,000 (95,902) 13,500 367,598 250,000 (50,000) 200,000 2 367,598 (98,124) 11,028 280,502 200,000 (50,000) 150,000 3 280,502 (99,243) 8,415 189,674 150,000 (50,000) 100,000 4 189,674 (100,101) 5,690 95,263 100,000 (50,000) 50,000 5 95,263 (98,121) 2,858 0 50,000 (50,000) 0 In applying paragraph 102A and paragraph 38(b) of Ind AS 116, Seller-lessee recognises in profit or loss the difference between the payments made for the lease and the lease payments that reduce the carrying amount of the lease liability. For example, if Seller-lessee pays ₹99,321 for the use of the building in Year 2, it recognises ₹1,197 (₹99,321 - ₹98,124) in profit or loss. Approach 2--Equal lease payments over the lease term Applying paragraph 102A of Ind AS 116, Seller-lessee determines 'lease payments' to reflect equal periodic payments over the lease term that, when discounted usin....
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....ability at the commencement date of ₹450,000.] 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 to paragraph 34 has been deleted in paragraph 29. Paragraph C9(b) and paragraph C9(c) of Appendix C, Effective Date and Transition, given in context of fair value model of investment property have been deleted. However, paragraph numbers have been retained in Ind AS 116 to maintain consistency with paragraph numbers of IFRS 16. 2. Paragraph 50....