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Calculation of operating lease as per Ind AS 17

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Divya asked almost 2 years ago

It is given in ind as 17 that if payments to lessor are structured to increase in line with inflation , then not to straight line lease rental over the lease term . My question is whether only escalation part not to be straight line or whole of lease rentals? and if not to be straightlined then what method to be consider to charge lease rental to P/L in such case?

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Open uri20170510 32134 ng4pv?1494421709 SONIYA answered almost 2 years ago

straight line basis of accounting for lease rental should be followed unless another method of accounting for rental which better reflects the time pattern of use of the leased asset is available.Therefore, in a case involving increasing rental, which in no case can represent a time pattern in which benefit derived from the use of the leased asset is diminished, the only choice one is left with is to adopt the straight-line basis of accounting for lease rental as income. rentals for the first, second and third years are fixed at Rs.75, Rs.100 and Rs.125. The total rental is Rs.300. As per AS-19, the income that will be recognised in each year will be Rs.100 against Rs.75 actually receivable in the first year. This excess Rs.25 recognised as income will appear as an asset and will be adjusted in the third year against the actual income of Rs.125, thus, equalising income in each year.

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