ARTICLES

Lease Accounting

Lease accounting with an interest-free deposit

Lease accounting with an interest-free deposit Details for lease accounting Let us assume the following details for lease accounting: Lease start date: 1-Apr-2019 Lease end date: 31-Mar-2024 Lease payments: Rs. 2,75,000 Lease Deposit: Rs. 3,00,000 Payment frequency: Annual – payable…

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Journal entries for lease accounting

Journal entries for lease accounting Details for lease accounting Let us assume the following details for lease accounting: Lease start date: 1-Apr-2019 Lease end date: 31-Mar-2024 Lease payments: Rs. 2,75,000 Payment frequency: Annual – payable at the end Incremental borrowing…

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Steps in lease accounting

Steps in lease accounting Details for lease accounting Let us assume the following details for lease accounting as per Ind AS 116 Lease start date: 1-Apr-2019 Lease end date: 31-Mar-2024 Lease payments: Rs. 2,75,000 Payment frequency: Annual – payable at…

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Operating lease vs financing lease

Operating lease vs financing lease Classification of Lease Leases are classified as either finance lease or operating lease. A finance lease is like buying an asset with the finance provided by an external party. It allows a lessee to own…

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Lease Accounting as per IFRS 16 vs. AS 19

Lease Accounting as per IFRS 16 vs. AS 19 Sl. No.TopicInd AS 116AS 191Applicability to land & buildingSpecific provisions dealing with leases of land and building exists in Ind AS 116Not applicable to lease of lands2Residual ValueNo definition of “Residual…

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Lease modifications

Lease modifications What is meant by lease modification? A lease modification is a change in the scope of a lease, or the consideration for a lease, that was not part of its original terms and conditions. Examples of lease modifications…

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How to compute right-to-use asset

How to compute right-to-use asset Initial measurement of the right-of-use asset At the commencement date, a lessee should recognise a right-of-use asset and a lease liability. At the commencement date, a lessee should measure the right-of-use asset at cost.The cost…

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Lease Accounting as per Ind AS 116

Lease Accounting as per Ind AS 116 Summary of the key provisions of Ind AS 116 Ind AS 116 covers Lease Accounting, and this has replaced the earlier accounting standard Ind AS 17A lease is an agreement by which the…

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Lease Accounting as per IFRS 16

Lease Accounting as per IFRS 16 Summary of the key provisions of IFRS 16 IFRS 16 covers Lease Accounting, and this has replaced the earlier accounting standard IAS 17A lease is an agreement by which the owner known as ‘lessor’,…

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Extracts from Annual reports – Lease Accounting

Extracts from Annual reports – Lease Accounting Infosys Ltd Annual Report YE 31-Mar-2021 Leases            Accounting policy The Group as a lessee      The Group’s lease asset classes primarily consist of leases for land, buildings and computers. The Group assesses whether a…

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Objective & Scope of lease accounting standard

Objective & Scope of lease accounting standard Objective Sets out the principles for recognition, measurement, presentation and disclosure of leasesObjective is to ensure that lessees and lessors provide relevant information that faithfully represents those transactionsEnables users to assess the effect…

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Hedge Accounting

Steps in a cash flow hedge

Identify the hedged item Identify the hedging instrument Designation/qualifying criteria of the hedge Hedge effectiveness requirements to be fulfilled Account for the hedging relationship Rebalancing and discontinuance of hedge accounting
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What is a fair value hedge?

Fair value hedging as the name implies strives to hedge the fair value of an existing asset or liability and certain other firm commitments. In a fair value hedge, the fair value changes to the hedging instrument and the hedged…
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Accounting for fair value hedge

The hedge should be designated at the inception of the hedging relationship and a formal designation and documentation of the same required. The documentation should contain the entity’s risk management strategy and objective for undertaking the hedge. The effect of…
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Accounting for the forward element

Change in the fair value of the forward element of a forward contract that hedges a transaction related hedged item should be recognised in other comprehensive income to the extent it relates to the hedged item. The cumulative change in…
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Hedge effectiveness requirements

Rebalancing is permitted for the purpose of maintaining the hedge ratio to comply with the hedge effectiveness requirements. Changes to designate quantities of a hedged item or hedging instrument for a different purpose do not constitute rebalancing.
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Rebalancing by changing the hedge ratio

Rebalancing is a new concept introduced by a major amendment to IFRS 9 during November 2013. Rebalancing means adjustments made to the quantities of the hedged item or the hedging instrument of an existing hedging relationship for the purpose of…
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What is a Cash flow hedge?

A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a component thereof. It covers future interest payments on variable-rate debt. It…
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Discontinuance of hedge accounting

As per the new requirements, hedge accounting cannot be voluntarily discontinued. Hedge accounting can be discontinued only if the hedge effectiveness requirements are not met or that the hedging instrument is liquidated. Even when the hedge effectiveness requirements are not…
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Discontinuation of hedge accounting

Discontinuation of hedge accounting Only prospective discontinuation Discontinuation of hedge accounting applies prospectively from the date on which the qualifying criteria are no longer met. An entity shall not de-designate and thereby discontinue a hedging relationship that: still meets the…

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Hedging instruments and hedged items

Hedging instruments and hedged items Hedging  instrument A hedging instrument should normally have one or more of the following characteristic features It should help minimise risk.It should protect the profit still unrealised by locking the same.It should not have the…

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Qualifying criteria for hedge accounting

Qualifying criteria for hedge accounting Three criteria for hedge accounting A hedging relationship qualifies for hedge accounting only if all of the following criteria are met: Eligible instruments only The hedging relationship consists only of eligible hedging instruments and eligible…

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Publications

Accounting for Investments – Volume 2

Accounting for Investments – Volume 2  Preface to Volume 2 Accounting for Investments – Fixed Income Securities & Interest Rate Derivatives is the second volume of the Accounting for Investments series. This volume covers the financial instruments of fixed income securities…

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Message from Shri Yagnesh Mohanlal Desai

Message from Shri Yagnesh Mohanlal Desai I have gone through the manuscript of Book – 1 viz., ‘Financial Instruments – An Introduction as per Ind AS 109’ in the series ‘Financial Instruments as per Ind AS’. CA R Venkata Subramani…

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Introduction by Shri M P Vijayakumar

Introduction by Shri M P Vijayakumar Almost all business transactions culminate in financial instruments in some form. In the present era of money, money and money, we witness an increasing trend of businesses being done through contractual arrangements which are…

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Foreword by Shri T N Manoharan

Foreword by Shri T N Manoharan Mr R. Venkata Subramani, known for his expertise in the field of Financial Instruments accounting, has come up with a new series of books on Financial Instruments as per Ind AS, incorporating all the relevant…

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Message / Review from CA P. R. Ramesh

Message / Review from CA P. R. Ramesh Financial Instruments is by far the most complex and difficult subject in the field of accounting. The varied nature of such instruments with a wide range of derivatives and associated risk makes…

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Expected Credit Loss

How is the expected credit loss measured

How is the expected credit loss measured ECL measurement criteria An entity shall measure expected credit losses of a financial instrument in a way that reflects: an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;the time…

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Approaches for assessing credit risk

Approaches for assessing credit risk Drivers of expected credit loss The Standard explains that an entity may apply various approaches to determine whether the credit risk on a financial instrument has increased significantly since initial recognition or when measuring expected…

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Ind AS 109 / IFRS 9

Accounting treatment for FVOCI Instruments

Accounting treatment for FVOCI Instruments Is there any difference between the accounting treatment for equity instruments and debt instruments classified as Fair Value Through Other Comprehensive Income (FVOCI)?  The answer is ‘yes’. Frequently participants in my class ask me the…

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Effective interest Rate

Effective interest Rate Effective interest rate – definition The rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or…

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Modification of contractual cash flows

Modification of contractual cash flows Modification due to renegotiation When the contractual cash flows of a financial asset are renegotiated or otherwise modified and the renegotiation or modification does not result in the de-recognition of that financial asset, an entity…

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Ind AS 102 / IFRS 2

Main Features of Ind AS 102

Main Features of Ind AS 102 Share based payment transactions Indian Accounting Standard Ind AS 102 deals with Share based payment trans-actions. This is one of the standards announced by MCA IFRS 2 is the corresponding Accounting Standard issued by…

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Fair Value of Loans

Miscellaneous items – Ind AS 21

Miscellaneous items – Ind AS 21 Intra-group transactions While following the normal consolidation process, intra-group balances and intra-group transactions of a subsidiary are eliminated, thereby incorporating the results and the financial position of the foreign operation with that of the…

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Editorial Team

CA Kamal Garg

CA Kamal Garg CA Kamal Garg CA Kamal Garg (Kamal) is a Fellow Member of The Institute of Chartered Accountants of India (ICAI) and a First Class Commerce Baccalaureate from Deen Dayal Upadhyaya College, University of Delhi He holds a…

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CA Viral Shah

CA Viral Shah He is a fellow Member of ICAI, also holds bachelor’s and Master’s in Commerce from Gujarat University, AhmedabadHe holds a USA CPA license from Arizona State Board of AccountancyHe also has successfully passed the certified course of…

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Dr. Anand Banka

Dr. Anand Banka Dr. Anand Banka is a Fellow Chartered Accountant with PhD in Finance, an Author of 6 best-selling books and a celebrated faculty for courses on International Financial Reporting Standards (IFRS). He started young and always had zeal…

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Dr. K. Sriram

Dr. K. Sriram Sriram is a Consulting Actuary engaged in Employee Benefits Consulting Practice since 2007 He is also an Actuarial Consultant- Trainer to some of the leading analytics firms in the area of actuarial analytics Sriram has over two…

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Mohan R. Lavi

Mohan R. Lavi He has over 25 years of experience in industry across a variety of industries, qualified as Chartered Accountant in 1989 Mohan is the author of books on US GAAP, IFRS and the Sarbanes Oxley Act He writes…

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Arunachalam Rajaraman

Arunachalam Rajaraman He is a Consulting Actuary and Cost & Management Accountant from Chennai with about 25+ years of work and consulting experience. His experience is spread across Consulting, Technology, Investments, Pensions, Life Insurance and General Insurance.   He had earlier been elected and…

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CA Sanjay Sisodia

CA Sanjay Sisodia A senior Chartered Accountant professional with broad knowledge of fund accounting, financial business principles of asset management, hedge fund industry including role performed by service providers in middle & back office, fund administration, reconciliation, custodians, prime brokers,…

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Sumit Dhadda

Sumit Dhadda Chartered accountant, member since 2003 & secured gold medal in CA Inter exams (AIR 25th), Diploma in Information System Audit & Risk Management, Certified Anti Money Laundering Specialist, Certified Concurrent Auditor Registered Valuer from Insolvency & Bankruptcy Board…

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Yagnesh Mohanlal Desai

Yagnesh Mohanlal Desai Professional Accountant practicing since August 1983 Actively participated in the process of formulation of IFRS in India Advising and implementing Indian Accounting Standards (Ind AS) Imparting training in the field of Accounting and Auditing Standards Helping big…

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CA Sunitha Suri

CA Sunitha Suri Sunitha is a Chartered Accountant with over 10 years’ experience in international taxation She is also a Cost and Management Accountant (India) and Cost Management Accountant (UK) She has co-authored the chapter ’Dispute Resolution’ in the book ‘Transfer Pricing…

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