Objective & Scope of lease accounting standard
Objective
- Sets out the principles for recognition, measurement, presentation and disclosure of leases
- Objective is to ensure that lessees and lessors provide relevant information that faithfully represents those transactions
- Enables users to assess the effect that leases have on the financial position, financial performance and cash flows of an entity
- Consistently applied to contracts with similar characteristics and in similar circumstances
Scope
Ind AS 116 is applied to all leases, including leases of right-of-use assets in a sublease.
Out of scope:
- leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources;
- leases of biological assets within the scope of Ind AS 41, Agriculture
- service concession arrangements as per Ind AS 115, Revenue from Contracts with Customer;
- licences of intellectual property granted by a lessor within the scope of Ind AS 115, Revenue from Contracts with Customers
- rights held by a lessee under licensing agreements within the scope of Ind AS 38, Intangible Assets, for such items as motion picture films, video recordings, plays, manuscripts, patents and copyrights.
Ind AS 116 may be applied for in respect of leases of intangible assets but not required to do so.
Portfolio application
Ind AS 116 requires the accounting for an individual lease
- Applied to a portfolio of leases with similar characteristics if the effects on the financial statements would not differ materially from applying Ind AS 116 to the individual leases within that portfolio
- If accounting for a portfolio, should use estimates and assumptions commensurate with the size and composition of the portfolio
Combination of contracts
Combine two or more contracts entered into at/near the same time with the same counterparty or related parties of the counterparty
Accounted for the contracts as a single contract if one or more of the following criteria are met:
- the contracts are negotiated as a package with an overall commercial objective that cannot be understood without considering the contracts together
- the amount of consideration to be paid in one contract depends on the price or performance of the other contract
- the rights to use underlying assets conveyed in the contracts form a single lease component
No post found!
What is the difference between operating lease and finance lease?
Lease accounting, lease period extended after year 1 – Journal entries
Lease accounting, interest-free deposit lease period extended after year 1
Lease accounting Journal Entries for Modification
Lease accounting with an interest-free deposit
Journal entries for lease accounting
Operating lease vs financing lease
Lease Accounting as per IFRS 16 vs. AS 19
How to compute right-to-use asset
How to determine the lease term as per the standard
How to separate the components of a lease contract
How to identify a lease contract as per the lease accounting standard
Lease Accounting as per Ind AS 116
Presentation & Disclosure – lease accounting standard
What is the new lease accounting standard
Lease Accounting as per IFRS 16
Extracts from Annual reports – Lease Accounting