Lease Accounting related Articles

Lease Accounting

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 frequency: Annual – payable at the end Incremental borrowing rate: 9% Lease extension on 1-4-2020: Lease Modification effective date: 1-Apr-2020 Lease end date extended up to: 31-Mar-2026 All other terms remain the same 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 modification. This would result in amortising an additional amount and the …
Read More

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 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 at the end Incremental borrowing rate: 9% Lease extension on 1-4-2020: Lease Modification effective date: 1-Apr-2020 Lease end date extended up to: 31-Mar-2026 All other terms remain the same 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 modification. This would result in amortising an additional …
Read More

Lease accounting Journal Entries for Modification

Lease accounting Journal entries for Modification Details for lease accounting with modification 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 at the end Incremental borrowing rate: 9% Lease modification: Lease Modification effective date: 1-Apr-2020 Lease payments: Rs. 3,25,000 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 modification. This would result in amortising an additional amount and the finance charges based on the revised lease liability should be recomputed. Right-of-use Recognition …
Read More

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 at the end Incremental borrowing rate: 9% Right-of-use Recognition of Lease liability Amortisation of Right-of-use Finance cost Interest free deposit Imputed interest income Amortisation of Right-of-use Trial balance Profit and Loss Account Balance Sheet
Read More

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 rate: 9%   Right-of-use   Recognition of Lease liability Amortisation of Right-of-use Finance cost Trial balance Profit & Loss Account Balance Sheet
Read More

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 the end Incremental borrowing rate: 9% Step 1: Calculate the right-of-use The right-of-use is first calculated as follows: Step 2: Prepare amortisation schedule The amortisation schedule based on straight line method is calculated as follows: Step 3: Calculate Lease Liability The lease liability is computed as follows: Step 4: Calculate the finance charges The finance charges for the lease liability is calculated as follows:
Read More

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 an asset with the help of finance from the lessor. The lessee has the option to be the permanent owner of the asset at the end of the lease term, subject to certain terms.An operating lease is like an asset rental. It allows the lessee to use the leased asset for a specific period of time. The specified period of time usually …
Read More

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 Value”The term “Residual Value” is defined3Inception & 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 distinguished4Recognition dateLease recognised as finance leases as assets and liabilities in balance sheet at the commencement of the lease termRecognition …
Read More

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 are as follows: increasing the scope of the lease by adding the right to use additional underlying assetsdecreasing the scope of the lease by removing the right to use of some underlying assetsincreasing the scope of the lease by extending the contractual lease termchanging the consideration in the lease by increasing or decreasing the lease payments Changes that result from renegotiations and changes …
Read More

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 sheet, the lessee should: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; anddisclose which line items in the balance sheet include those right-of-use assets.lease liabilities separately from other liabilities. If a lessee does not present lease liabilities separately in the balance sheet, the lessee should disclose which line …
Read More
1 2

Subscribe to our News Letter

Get periodical updates from us

Subscribe to our News Letter

I hope you enjoy reading this blog

Scroll to Top