Page 2 - 6. COMPILER QB - INDAS 116

INDAS – 116

LEASES

(TOTAL NO. OF QUESTIONS – 13)

INDEX

S.No. Particulars Page No.

1 RTP Questions 6.1

2 MTP Questions 6.7

3 Past Exam Questions 6.16

RTPs QUESTIONS

Q1 (Nov. 18)

st
A Ltd. prepares its financial statements for the period ending on 31 March each year. The financial
statement for the year ended 2017-2018 is under preparation. The following events are relevant to these
financial statements:
st
On 1 April, 2016, A Ltd. purchased an asset for Rs2,00,00,000. The estimated useful life of the asset was 10
years, with an estimated residual value of zero. A Ltd. immediately leased the asset to B Ltd. The lease term
was 10 years and the annual rental, payable in advance by B Ltd., was Rs27,87,000. A Ltd. incurred direct
costs of Rs2,00,000 in arranging the lease. The lease contained no early termination clauses and

responsibility for repairs and maintenance of the asset rest with B Ltd. for the duration of the lease. The
annual rate of interest implicit in the lease is 8%. At an annual discount rate of 8% the present value of Rs
1 receivable at the start of years 1–10 is Rs 7·247.
Examine and show how the above event would be reported in the financial statements of A Ltd. for the year
st
ended 31 March, 2018 as per Ind AS.
SOLUTION (All Fig. in Rs. ‘000)

The lease of the asset by A Ltd. to B Ltd. would be regarded as a finance lease because the risks and

rewards of ownership have been transferred to B Ltd. Evidence of this includes the lease is for the whole of
the life of the asset and B Ltd. being responsible for repairs and maintenance.

As per para 36 of Ind AS 17, since the lease is a finance lease and A Ltd. is the lessor, A Ltd. will recognise a
financial asset i.e. as a receivable at an amount equal to the ‘net investment in finance leases. The amount

recognised will be the present value of the minimum lease payments which will be 20,197.39 i.e. 2,787 x
7.247.

6.1