ICAI issues exposure draft of Ind AS 116, Leases | KPMG | IN

ICAI issues exposure draft of Ind AS 116, Leases

ICAI issues exposure draft of Ind AS 116, Leases

The Ministry of Corporate Affairs (MCA) through a notification dated 16 February 2015 issued the Companies (Indian Accounting Standards) Rules

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Background

The Ministry of Corporate Affairs (MCA) through a notification dated 16 February 2015 issued the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS Rules) which laid down a road map for entities (other than insurance entities, banking entities and Non-Banking Financial Companies (NBFCs)) (corporate road map) for implementation of Ind AS converged with International Financial Reporting Standard (IFRS) in a phased manner. Accordingly, the MCA notified 40 Ind AS which included Ind AS 17, Leases.

Internationally, on 13 January 2016, the International Accounting Standards Board (IASB) issued IFRS 16, Leases.  The new Standard represented a fundamental shift in accounting for leases, specifically for lessees. Additionally, it is expected to increase transparency and comparability of published financial information as analysts and investors would be able to see a company’s own assessment of its lease liabilities, calculated using a prescribed methodology under Ind AS.

IFRS 16 is effective from 1 January 2019, with early application being permitted (as long as IFRS 15, Revenue from Contracts with Customers is also applied).

New development

On 18 July 2017, the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) issued an Exposure Draft (ED) of Ind AS 116, Leases. Ind AS 116 is largely converged with IFRS 16.

Ind AS 116 is expected to replace Ind AS 17 from its proposed effective date, being annual periods beginning on or after 1 April 2019.

The ED sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective of the ED is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. This information gives a basis for users of financial statements to assess the effect that leases will have on the financial position, financial performance and cash flows of the entity.

Comments on the ED may be submitted to ICAI by 31 August 2017.

This edition of IFRS Notes provides an overview of the key requirements of Ind AS 116 as proposed in the ED and highlights the key differences vis-à-vis IFRS 16.

To access the text of the Exposure Draft of Ind AS 116, please click here.

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