IND AS-116 summary
(Applicable from April,2019)
Scope– Applicable to all the contracts meeting the definition of LEASE except for: –
What is LEASE??
(Explicitly specified in a contract or Implicitly specified when asset is made available for use by the lessee)
Right to control use: – Throughout period of USE,
Lessee must allocate the total contract consideration to the lease and non-lease component on the basis of their relative stand-alone prices. If standalone prices are not available, then they must be estimated.
Separation is also mandatory where -contracts are negotiated as a PACKAGE with an overall commercial objective that cannot be understood without considering the contracts together
Key Note- 1- Renewal/Termination depends on factors that create economic benefit on renewal or termination.
2- Reassessment possible if there is significant change in circumstances.
Gross Investment- Total Minimum lease payments + Unguaranteed residual value
Net Investment- Present value (Total Minimum lease payments + Unguaranteed residual value)
If the intermediate lessor cannot readily determine the interest rate implicit in the sublease, then it uses the discount rate that it uses for the head lease to account for the sublease, adjusted for any initial direct costs associated with the sublease. However, if the head lease is a short-term lease for which the
company, as a lessee, has elected the short-term lease exemption, then as an intermediate lessor the company classifies the sublease as an operating lease.
SALE & LEASEBACK:
CHECK whether it qualifies as a SALE in accordance with the requirements of Ind AS 115