Ind AS -116 replaces the current guidance in Ind AS-17, ‘Leases’. The standard leads to more asset and liabilities being put on the lessee’s balance sheet. A key difference between IFRS 16 and ASC 842 will directly impact leverage and interest coverage ratios. ; The commencement date would be the date when the lessor makes the underlying asset available for the lessees use. For organizations with hundreds to thousands of leases, the need to be ready to comply with ASC 842 and/or IFRS 16 in just a year’s time has accounting teams scrambling. Download the ASC 842 Handbook. There are some very important differences between the two lease accounting standards. The ED sets out the principles for the recognition, measurement, presentation and disclosure of leases. ICAI has drawn attention of all concerned to 'Ind AS 116 - Leases' recently notified by MCA vide Notification dt. Transitioning from ASC 840 to ASC 842 As management considers how to tackle the exercise of assessing service arrangements for embedded leases, there are certain things that should be considered. Lessor’s accounting; Sale and leaseback transactions; Difference between IFRS 16, Ind AS 116, ASC 842 … Hemal Shah. Quickly browse through hundreds of Lease Accounting tools and systems and narrow down your top choices. All leases are to be treated in a similar way to finance leases applying Ind AS 17. In 2019, the latest FASB standard on lease accounting, ASC 842 (ASU 2018-11), went into effect for most public companies. India (ICAI) issued an Exposure Draft (ED) of Ind AS 116, Leases. In the time since FASB passed the new accounting standard ASC 842 in 2016, the organization has issued periodic updates to the codification for generally accepted accounting principles (GAAP). Effect of Ind AS on Actuarial Valuation requirement • When a company prepares its first Ind AS financial statements, it has to comply with Ind AS 101, and thereby need to provide comparative figures for 31.03.2016 (as per roadmap applicability). Comparative S.No. ASC 842 requires both lessors and lessees to determine the classification of all leases at the commencement of the lease. 1. As per the IFRS convergence status dated December 19, 2018 issued by the ICAI, its already cleared by the NACAS and submitted to MCA for Notification. Globally Ind AS 116 has been introduced with effect from 1st January, 2019 In India, ICAI issued an Exposure Draft in 2017 and kept it open for public comments However, the same has not been notified yet Notification needs to come by way of amendment to Accounting Standards Rules, 2015 ASC 840 vs ASC 842. Transition from Ind AS 17; New definition of lease; Lessee’s accounting under new guidance of Ind AS 116; Impact of Ind AS 116 on different industries like telecom, manufacturing, automobile, oil and gas etc. The FASB has amended ASC 842 three times in 2018, with further amendments for lessors under consideration. Page 24 Example - Transition Approach Particulars Full Retrospective Overview of Ind AS-116 ♠ The Ministry of Corporate Affairs (MCA) notified Ind AS 116, the new leases accounting standard on 30 th March 2019 with the effective date of its application from 1 st April 2019. In this article we will address the differences between ASC 840 and the current FASB lease accounting standard, ASC 842, with a focus on the lessee accounting treatment. Ind AS 116 is largely converged with IFRS 16. IFRS 16 scope excludes only items which are specifically covered by other standards however US GAAP excludes Inventory related leases, Assets under construction and leases for intangible assets. For more detail on the technical accounting as well as how companies can successfully achieve and maintain compliance with the standard, download our full ASC 842 Handbook. Download now Completeness of the service arrangement population : Management should develop a process to address the completeness of the service arrangement population, which may include (but is not limited to): i) Difficult to conduct performance ratios due to skewed comparatives of the old standard vs. the new one. Full retrospective approach A full retrospective approach requires companies to follow the scope of IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, and present financial statements, as if IFRS 16 has always been applied. 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