Lease Accounting as per IFRS 16 vs. AS 19

Sl. No.TopicInd AS 116AS 19
1Applicability to land & buildingSpecific provisions dealing with leases of land and building exists in Ind AS 116Not applicable to lease of lands
2Residual ValueNo definition of “Residual Value”The term “Residual Value” is defined
3Inception & commencement of leaseInception of lease and commencement of lease are different as per Ind AS 116Both the terms are used at some places in AS 19, and these terms are not defined and distinguished
4Recognition dateLease recognised as finance leases as assets and liabilities in balance sheet at the commencement of the lease termRecognition is at the inception of the lease
5Lease paymentsLease payments made during the period between inception of the lease and the commencement of the lease term is adjustedNo such adjustments as per AS 19
6Measurement principlesMeasurement aspects of investment properties (Ind AS 40) and biological assets (Ind AS 41) are dealt with separately. If such assets are provided or held under a lease agreement, then the measurement principles as per Ind AS 116 will not applyAS 19 does not contain such provisions
7Lease evaluationProvides guidance on accounting for incentives in the case of operating leases, and evaluating the substance of transactions having the legal form of a lease and determining whether such an arrangement contains an element of leaseDoes not contain such guidance
Sl. No.TopicInd AS 116AS 19
8Upward revision of unguaranteed residual valueUpward revision of unguaranteed residual value, during the term of the lease is permitted by the standardAS 19 prohibits upward revision of unguaranteed residual value, during the term of the lease
9Treatment of excess of sale proceeds over the carrying value of the asset in sale and leaseback transactionThe seller-lessee should measure the right-of-use asset arising from the leaseback based on the previous carrying amount. Any gain or loss relating to the rights transferred to the buyer-lessor should be recognised in the profit and loss accountIn case of a sale and leaseback transaction (in case of finance lease), the excess of sale proceeds, over the carrying amount of the asset, to be deferred and amortised by the seller(lessee) over the tenure of lease, in proportion to depreciation of the leased asset.
10Classification of lease liabilitiesLease liabilities are classified as current/non-current. It also makes reference to Ind AS 105 on “Non-current Assets Held for Sale and Discontinued Operations“These matters are not addressed in AS 19
11Expected inflationary costsFor operating lease, if escalation of lease rentals is attributable to the expected general inflation to compensate the lessor for expected inflationary costs, such costs shall not be straight linedAS 19 does not provide for the same
12Treatment of initial direct costs by lessorInitial direct costs, incurred by the lessor in case of operating lease, should be included in the carrying amount of leased asset and amortised as an expense, over the lease periodInitial direct costs, incurred by the lessor in case of operating lease, should be either charged off, at the time of incurrence or should be amortised over the lease period
13DisclosuresDisclosures are more as compare to AS 19Fewer disclosures as compared to Ind AS 116

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