ARTICLES
Lease Accounting
Lease Accounting Software Pricing
Lease accounting, lease period extended after year 1 – Journal entries
Lease accounting, lease period extended after year 1 – Journal entries Details for lease accounting for lease extension 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…
Lease accounting, interest-free deposit lease period extended after year 1
Lease accounting, interest-free deposit lease period extended after year 1 Details for lease accounting for lease extension When the lease is modified without any increase in the scope of the lease then lease liability and the right-of-use are recomputed on…
Lease accounting Journal Entries for Modification
Lease accounting Journal entries for Modification Details for lease accounting with modification When the lease is modified without any increase in the scope of the lease then lease liability and the right-of-use are recomputed on the effective date of such…
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…
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…
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…
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…
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…
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…
Presentation & Disclosure – lease accounting standard
Presentation & Disclosure – lease accounting standard Presentation A lessee should either present in the balance sheet, or disclose in the notes: right-of-use assets separately from other assets. If a lessee does not present right-of-use assets separately in the balance…
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…
How to determine the lease term as per the standard
How to determine the lease term as per the standard What is meant by ‘lease term’? An entity should determine the lease term as the non-cancellable period of a lease, together with both:periods covered by an option to extend the…
How to separate the components of a lease contract
How to separate the components of a lease contract Account for each component An entity should account for each lease component as a lease separately from non-lease components of the contract, unless the entity applies the practical expedient guidanceAn entity…
How to identify a lease contract as per the lease accounting standard
How to identify a lease contract as per the lease accounting standard General At inception of a contract, an entity should assess whether the contract is a lease or contains a lease The contract should convey the right to control…
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…
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’,…
What is the new lease accounting standard
What is the new lease accounting standard? What’s changed under IFRS 16? IFRS 16 / Ind AS 116 is the most significant change to lease accounting in the last several years. IFRS 16 is introduced with effect from 1 January…
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…
Exemptions that can be availed in lease accounting
Exemptions that can be availed in lease accounting Exemptions A lessee can avail exemption in respect of the following items: short-term leasesleases for which the underlying asset is of low valueIf a lessee elects not to apply then the lessee…
Lease Accounting as per IFRS 16 vs. IAS 17
Lease Accounting as per IFRS 16 vs. IAS 17 For Lessees For LesseesSl. NoTopicIFRS 16IAS 171Definition of a leaseAs per IFRS 16, a lease is a contract that conveys the right to control the use of an underlying asset for…
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…
Lease Accounting Software Modification and Termination
Lease Accounting Software Modification and Termination 1. Processing is done on a quarterly basis. 2. Journal entries are passed on a monthly basis always. All entries will be dated the end of each month. Exception is the payment of lease…
Lease Accounting Software – Deposit Management
Lease Accounting Software – Deposit Management Upload Lease Deposit Deposits with sample data Import ‘Lease advance’ file Click the import data and upload the advance.csv in the given format Deposits uploaded Compute the Lease Deposit Prepare the schedule of dates…
Lease Accounting Software Computation Process
Lease Accounting Software Computation Process Generate cash flows Based on the start date, effective date, end date, frequency of the lease, payable at beginning or end etc, cash flows for the entire period is generated as follows: Change the following…
Lease Accounting Software – Data Input Process
Lease Accounting Software – Data Input Process Creation of Company Super Admin is the administrative contact from RVSBELL Analytics, who will create the company and the user login ids for all the users of the application. Creation of users Three…
Hedge Accounting
Illustration of a net investment hedge by a parent entity
Steps in a cash flow hedge
What is a fair value hedge?
Steps involved in fair value hedge accounting
Accounting for fair value hedge
Accounting for the forward element
Treatment of time value /forward points in derivatives
Accounting for the time value of options
Hedge effectiveness requirements
Rebalancing by changing the hedge ratio
What is a Cash flow hedge?
Discontinuance of hedge accounting
Disclosures in respect of hedge accounting
Hedging fixed rate debt instrument with IRS
Relationship between components – cash flow hedge
Are RBI circulars relevant for ECL computation as per Ind AS 109?
Hedging a net position – cash flow hedge
Hedges of a net investment in a foreign operation
Accounting for net investment hedge – Only functional currency
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…
Equity derivatives and interest rate derivatives
Equity derivatives and interest rate derivatives Equity derivatives The important difference between futures contract and options contract is that in the case of a futures contract, the risk-reward is symmetric, whereas in an options contract, the risk reward is asymmetric….
Hedge Accounting as per indas109 / IFRS 9
Hedge Accounting as per Ind AS 109 / IFRS 9 It may be useful to understand the genesis of hedge accounting as to how the process itself matured over the last two decades. Even though this may not be relevant…
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…
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…
What is meant by Hedging & Hedge Accounting
What is meant by Hedging Requirements for hedging Hedging is a mechanism to either minimise the loss or to protect unrealised profits, if any. Maximising the profit is not an objective of hedging. Hedging is a risk management tool. There…
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…
Accounting for Investments – Volume 1
Financial Instruments Book Series as per Ind AS 109 (indas109)
Financial Instruments Book Series as per Ind AS 109 (indas109) Preface to the Book Financial instruments are probably the most complex topic in the entire literature of accounting standards. Accounting for financial instruments in the Indian context was earlier covered…
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…
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…
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…
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…
Expected Credit Loss
Key takeaways from the RBI notification dated 12th Nov 2021
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…
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…
Simplified Approach for ECL for trade receivables
Simplified Approach for ECL for trade receivables Trade receivables, contract assets & lease receivables An entity shall always measure the loss allowance at an amount equal to lifetime expected credit losses for: (a) trade receivables or contract assets that result…
What is meant by significant increase in credit risk
What is meant by significant increase in credit risk Significant increase in credit risk (SICR) At each reporting date an entity shall assess whether the credit risk on a financial instrument is increased significantly since initial recognition. The entity is…
What is the new Expected Credit Loss Model
Ind AS 109 / IFRS 9
Equity derivatives and interest rate derivatives
Equity derivatives and interest rate derivatives Equity derivatives The important difference between futures contract and options contract is that in the case of a futures contract, the risk-reward is symmetric, whereas in an options contract, the risk reward is asymmetric….
Hedge Accounting as per indas109 / IFRS 9
Hedge Accounting as per Ind AS 109 / IFRS 9 It may be useful to understand the genesis of hedge accounting as to how the process itself matured over the last two decades. Even though this may not be relevant…
Accounting for Investments – Volume 1
Debt instrument measured at FVOCI
Debt instrument measured at FVOCI For financial assets that are debt instruments measured at FVOCI, both the amortised cost and the fair value of the instrument are relevant. The reason for this is the objective of categorising a debt instrument…
Financial Instruments Book Series as per Ind AS 109 (indas109)
Financial Instruments Book Series as per Ind AS 109 (indas109) Preface to the Book Financial instruments are probably the most complex topic in the entire literature of accounting standards. Accounting for financial instruments in the Indian context was earlier covered…
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…
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…
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…
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…
Fair Value of Loans
Debt instrument measured at FVOCI
Debt instrument measured at FVOCI For financial assets that are debt instruments measured at FVOCI, both the amortised cost and the fair value of the instrument are relevant. The reason for this is the objective of categorising a debt instrument…
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…
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…
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…
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…
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…
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…
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…
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,…
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…
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…
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…