Ind as 116 and AS 17? What was in lease accounting before Ind as and after Ind as

Question

Accepted Answer

Ind AS 116 and AS 17 are accounting standards related to lease accounting.

Ind AS 116 is the Indian Accounting Standard for lease accounting, which was introduced in 2019.
AS 17 is the Accounting Standard for lease accounting issued by the Institute of Chartered Accountants of India (ICAI).
Before Ind AS, lease accounting in India followed AS 17, which required lessees to classify leases as either finance leases or operating leases.
Under AS 17, finance leases were capitalized on the balance sheet, while operating leases were not.
Ind AS 116 brought significant changes to lease accounting by eliminating the distinction between finance leases and operating leases for lessees.
Under Ind AS 116, lessees are required to recognize all leases on the balance sheet as right-of-use assets and lease liabilities.
This change aims to provide a more transparent and comprehensive view of a company's lease obligations and assets.
Ind AS 116 also introduced new disclosure requirements for lease arrangements.
Overall, Ind AS 116 brought convergence with international accounting standards, such as IFRS 16, and improved the consistency and comparability of lease accounting practices.

Accepted Answer

IND AS 17 deals with operating lease and financial lease. Lessee will classify an lease as Financial lease if any of the following 5 conditions has been satisfied i, e 1. Lessee will become the owner of the property at the end of lease term 2. Lease term covers the major economic life of an asset(>=75%) 3. Present of lease liability covers the substantial amount of fair value of property 4. Asset has been designed for a specified usage of lessee 5. Lessee has the option to purchase an asset from lessor below Market price.

But in IND AS 116 if under a contract or part of contract the lessee has a right to use an identified asset for a specified periods in exchange for a considerable then it will treated as lease and it will be measured and recognised as per IND AS 116.