TaxTMI 
TaxTMI 
TaxTMI 
Leases
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....esents those transactions. This information 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 an entity. 2 An entity shall consider the terms and conditions of contracts and all relevant facts and circumstances when applying this Standard. An entity shall apply this Standard consistently to contracts with similar characteristics and in similar circumstances. Scope 3 An entity shall apply this Standard to all leases, including leases of right-of-use assets in a sublease, except for: (a) leases to explore for or ....
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....use in an entity's operations. The election for leases for which the underlying asset is of low value can be made on a lease-by-lease basis. Identifying a lease (paragraphs B9-B33) 9 At inception of a contract, an entity shall assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Paragraphs B9-B31 set out guidance on the assessment of whether a contract is, or contains, a lease. 10 A period of time may be described in terms of the amount of use of an identified asset (for example, the number of production units that an item of equipment will be used to produce). 11 An entity shall reassess whether a contract is, or contains, a lease only if the terms and conditions of the contract are changed. Separ....
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....n to exercise that option; and (b) periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. 19 In assessing whether a lessee is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, an entity shall consider all relevant facts and circumstances that create an economic incentive for the lessee to exercise the option to extend the lease, or not to exercise the option to terminate the lease, as described in paragraphs B37- B40. 20 A lessee shall reassess whether it is reasonably certain to exercise an extension option, or not to exercise a termination option, upon the occurrence of either a significant event or a significant change in circumstances that: (a) is within the control of the lessee; and (b) affects whether the lessee is reasonably certain to exercise an option not previously included in its determination of the lease term, or not to exercise an option previously included in its determination of the lease term (as described in paragraph B41). 21 An entity shall revise the lease term if there is a change in the non-cancellable period of a lease. For examp....
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....urred 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 payments that are not paid at that date. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee's incremental borrowing rate. 27 At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date: (a) fixed payments (including in-substance fixed payments as described in paragraph B42), less any lease incentives receivable; (b) variable lease payments that depend on an index or a rate, initially measured using th....
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....t-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 reassessment or lease modifications specified in paragraphs 39-46, or to reflect revised in-substance fixed lease payments (see paragraph B42). 37 Interest on the lease liability in each period during the lease term shall be the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability. The periodic rate of interest is the discount rate described in paragraph 26, or if applicable the revised discount rate described in paragraph 41, paragraph 43 or paragraph 45(c). 38 After the commencement date, a lessee shall recognise in profit or loss, unless the costs are included in the carrying amount of another asset applying other applicable Standards, both: (a) interest on the lease liability; and (b) variable lease payments not included....
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.... 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 in the interest rate. Lease modifications 44 A lessee shall account for a lease modification 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. 45 For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modification a lessee shall: (a) allocate the consideration in the modified contract applying paragraphs 13-16; (b) determine the lease term of the modified lease applying paragraphs 18-19; and (c) remeasure the l....
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....de 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 liabilities. If a lessee does not present lease 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 ....
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....osts 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 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 53-5....
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....nsfers 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 for it to be reasonably certain, at the inception date, that the option will be exercised; (c) the lease term is for the major part of the economic life of the underlying asset even if title is not transferred; (d) at the inception date, the present value of the lease payments amounts to at least substantially all of the fair value of the underlying asset; and (e) the underlying asset i....
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....ded 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) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; (c) any residual value guarantees provided to the lessor by the lessee, a party related to the lessee or a third party unrelated to the lessor that is financially capable of discharging the obligations under the guarantee; (d) the exercise price of a purchase opti....
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....ubsequent 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 the income allocation over the lease term and recognise immediately any reduction in respect of amounts accrued. 78 A lessor that classifies an asset under a finance lease as held for sale (or includes it in a disposal group that is classified as held for sale) applying Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations, shall account for the asset in accordance wi....
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....difications 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 lessor. Paragraphs 90-97 specify requirements on how to meet this objective. 90 A lessor shall disclose the following amounts for the reporting period: (a) for finance leases: (i) selling profit or loss; (ii) finance income on the net investment in the lease; and (iii) income relating to variable lease payments not included in the measurement of the net investment in the lease. (....
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....1 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 accounted for as a sale of that asset. Transfer of the asset is a sale 1....
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.... 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 i....
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....Incremental costs of obtaining a lease that would not have been incurred if the lease had not been obtained, except 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 t....
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....option to extend or terminate a lease that are not included 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. ....
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....in paragraph 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 A leas....
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.... 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 consideration of future events that, at inception of....
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....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 another party a portion of the cash flows derived from use of an asset as....
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....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 those to operate or maintain an asset are often essential to the efficient use of an asset, they are not righ....
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....ease. 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 good or service to the lessee. For example, a lessor may include in the total amount payable a charge for administrative tasks, or....
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....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 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....
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.... 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 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 ....
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....ansaction 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 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 ....
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....ers 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 (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 underly....
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....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. 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 ....
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....cal expedient in paragraph C3, it shall disclose that fact and apply the practical expedient to all of its contracts. As a result, the entity shall apply the requirements in paragraphs 9-11 only to contracts entered into (or changed) on or after the date of initial application. Lessees C5 A lessee shall apply this Standard to its leases either: (a) retrospectively to each prior reporting period presented applying Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors; or (b) retrospectively with the cumulative effect of initially applying the Standard recognised at the date of initial application in accordance with paragraphs C7-C13. C6 A lessee shall apply the election described in paragraph C5 consistently to all of its leases in which it is a lessee. C7 If a lessee elects to apply this Standard in accordance with paragraph C5(b), the lessee shall not restate comparative information. Instead, the lessee shall recognise the cumulative effect of initially applying this Standard as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application. Leases previously classified as opera....
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.... 37, Provisions, Contingent Liabilities and Contingent Assets, immediately before the date of initial application as an alternative to performing an impairment review. If a lessee chooses this practical expedient, the lessee shall adjust the right-of-use asset at the date of initial application by the amount of any provision for onerous leases recognised in the balance sheet immediately before the date of initial application. (c) a lessee may elect not to apply the requirements in paragraph C8 to leases for which the lease term ends within 12 months of the date of initial application. In this case, a lessee shall: (i) account for those leases in the same way as short-term leases as described in paragraph 6; and (ii) include the cost associated with those leases within the disclosure of short-term lease expense in the annual reporting period that includes the date of initial application. (d) a lessee may exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application. (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 classifi....
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....operating leases applying Ind AS 17 but finance leases applying this Standard, account for the sublease as a new finance lease entered into at the date of initial application. Sale and leaseback transactions before the date of initial application C16 An entity shall not reassess sale and leaseback transactions entered into before the date of initial application to determine whether the transfer of the underlying asset satisfies the requirements in Ind AS 115 to be accounted for as a sale. C17 If a sale and leaseback transaction was accounted for as a sale and a finance lease applying Ind AS 17, the seller-lessee shall: (a) account for the leaseback in the same way as it accounts for any other finance lease that exists at the date of initial application; and (b) continue to amortise any gain on sale over the lease term. C18 If a sale and leaseback transaction was accounted for as a sale and operating lease applying Ind AS 17, the seller-lessee shall: (a) account for the leaseback in the same way as it accounts for 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 rel....
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....as specified in paragraph C20D. C20D An entity is not required to restate prior periods to reflect the application of these amendments. The entity may restate prior periods if, and only if, it is possible without the use of hindsight. If an entity does not restate prior periods, the entity shall recognize any difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period that includes the date of initial application of these amendments in the opening retained earnings (or other component of equity, as appropriate) of the annual reporting period that includes the date of initial application of these amendments.] 13[Lease liability in a sale and leaseback C20E A seller-lessee shall apply Lease Liability in a Sale and Leaseback (see paragraph C1D) retrospectively in accordance with Ind AS 8 to sale and leaseback transactions entered into after the date of initial application.] Withdrawal of other Standards &....
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....g at the proportion of the previous carrying amount of the building that relates to the right of use retained by Seller-lessee, which is Rs.699,555. Seller-lessee calculates this amount as: Rs.1,000,000 (the carrying amount of the building) x Rs.1,259,200 (the discounted lease payments for the 18-year right-of-use asset) / Rs.1,800,000 (the fair value of the building). Seller-lessee recognises only the amount of the gain that relates to the rights transferred to Buyer-lessor of Rs.240,355 calculated as follows. The gain on sale of the building amounts to Rs.800,000 (Rs.1,800,000 -Rs.1,000,000), of which: (a) Rs.559,645 (Rs.800,000 x Rs.1,259,200 / Rs.1,800,000) relates to the right to use the building retained by Seller- lessee; and (b) Rs.240,355 (Rs.800,000 x (Rs.1,800,000 - Rs.1,259,200) / Rs.1,800,000) relates to the rights transferred to Buyer-lessor. At the commencement date, Seller-lessee accounts for the transaction as follows. Cash Rs.20,00,000 Right-of-use asset Rs.6,99,555 Building Rs.10,00,000 Lease Liability Rs.12,59,200 Financial Liability Rs.2,00,000 Gain on rights transferred Rs.2,40,355 Buyer-lessor At the commencement date, Buyer-lessor a....
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....e right-of-use asset's future economic benefits evenly over the lease term and, thus, depreciates the right-of-use asset on a straight-line basis. In measuring the lease liability applying paragraphs 36-46 of Ind AS 116, Seller-lessee develops an accounting policy for determining 'lease payments' in a way that it would not recognise any amount of the gain that relates to the right of use it retains. Depending on the circumstances (including the method Seller- lessee used-applying paragraph 100(a) of Ind AS 116-for determining the measurement of the right-of-use asset and the gain recognised on the transaction at the commencement date), either Approach 1 or Approach 2 could meet the requirements in paragraph 102A. Approach 1-Expected lease payments at the commencement date Applying paragraph 102A of Ind AS 116, Seller-lessee determines 'lease payments' to reflect the expected lease payments at the commencement date that, when discounted using its incremental borrowing rate, result in the carrying amount of the lease liability at that date of Rs.450,000. The lease liability and the right-of-use asset arising from the leaseback are: Lease Liability Right-o....
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....ansferred to Buyer-lessor that relates to the right of use retained by comparing, at the commencement date, the right of use it retains via the leaseback to the rights comprising the entire building. Paragraph 100(a) does not prescribe a particular method for determining that proportion. (b) Applying paragraph 102A and paragraph 36(b) of Ind AS 116, Seller-lessee reduces the carrying amount of the lease liability with 'lease payments' that reflect the expected lease payments estimated at the commencement date and, when discounted, result in the carrying amount of the lease liability at that date of Rs.450,000. (c) Applying paragraph 102A and paragraph 36(a) of Ind AS 116, Seller-lessee increases the carrying amount of the lease liability to reflect interest on the lease liability using its incremental borrowing rate. (d) Applying paragraph 102A and paragraph 36(b) of Ind AS 116, Seller-lessee reduces the carrying amount of the lease liability with 'lease payments' that reflect equal periodic payments over the lease term that, when discounted, result in the carrying amount of the lease liability at the commencement date of Rs.450,000.] Appendix 1 Note: This Ap....
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....463(E) dated 24-07-2020 5. Inserted vide NOTIFICATION NO. G.S.R. 463(E) dated 24-07-2020 6. Substituted vide NOTIFICATION NO. G.S.R. 419(E) dated 18-06-2021 before it was read as "(b) any reduction in lease payments affects only payments originally due on or before the 30th June, 2021 (for example, a rent concession would meet this condition if it results in reduced lease payments on or before the 30th June, 2021 and increased lease payments that extend beyond the 30th June, 2021); and" 7. Inserted vide NOTIFICATION NO. G.S.R. 419(E) dated 18-06-2021 8. Inserted vide NOTIFICATION NO. G.S.R. 419(E) dated 18-06-2021 9. Inserted vide NOTIFICATION NO. G.S.R. 419(E) dated 18-06-2021 10. Inserted vide Notification No. G.S.R. 554(E) dated 09-09-2024 11. Inserted vide Notification No. G.S.R. 554(E) dated 09-09-2024 12. Substituted vide Notification No. G.S.R. 554(E) dated 09-09-2024 before it was read as, "C2 For the purposes of the requirements in paragraphs C1-C19, the date of initial application is the beginning of the annual reporting period in which an entity first applies th....