ory aoe Paes 26 'IND AS 115~Revenue from Contracts with Customers 26.1 26.38, a INDASII6-Leases 274-27.38 8 IND AS 102—ShareBased Payments 281-2814 » IND AS 103 Business Combination /39.1-29.5 30 IND AS 110 - Consolidated Financial Statement 30-3037 IND AS 27 ~ Separate Financial Statements IND AS 112 Disclosure of Interests in Other Entities 3 IND AS 111 —Joint Arrangements 311-316 32 IND AS 28— Investments in Associates & Joint Venture 32.1-32.14 3 IND AS 32, 107, 109 Financial Instruments 381-346 4 ‘Corporate Social Responsibility Ma-39| Wes REVENUE FROM CON CUSTOMERS ‘OPE =| tis Standard soles to ell contrcte with castors, EXCEPT the fas 2: Leone contracts within the ope of ld AS TS re -bnconce contreees (Ind AS 104) <= Fnancel instruments and thar contractual ahs o ablations within the wope of lod AS 108, id AS 10, id AS 1, Ind AS 2T & Ind AS 28; an} No exchanges betwen entities in the some line of business to fcoabe (For wumpla, ehie Standard would not apoly #2 cantrach bebwean two ol compares that agree to an exchange of oi Fh demond fram thei eastomers in siffrent toatfad oe aly bas: Discount fssessment sporcech zn on x |Seondolone sline rite i the price ot which ep entity would sal « promised aged or service separately bo a similr customer under siniler circumstances: if a stend-olone galing price is not dirsctly observable, an entity shel astimata the stand-olone saling price after considering all information (indudirg market conditions lentityrspecific factors end infortation ahout the customer or class of customer) that Is essonably avaiable to the ent Jin doing so, on entity shall maximise the use of obvarvable inputs and apply estimation [methods Cdscussed below) consistently in similar circumstances: A combinetion of below sthode may azo be used: = | _avsusren manner || exrecren cost pis ds eee Price oF competitors + Forecast is expected costs |_|» Total Transaction Price [ A] sitar goods or serves for ech performance LESS sum of abzerable | — end adjusting thore prices bligation and then add on || standelone seling prices of | — A] to reece the entity's appropriate margin for ther goods or ervies in Coste and margine thot good or service the contract (after 1 locating duct) z= 1 = Ao refer Note Belowntiiy mou die 6 residusl aporaath to estimate the standelone sell price only + snviey calle cod or serve to diferent customers (oro broad ranee © Such ceed or service fas not previously bean sald 07 e stand-alone besis and its ricer ie nob vet decided [an entity shall ellcate the dasount before usina the cetidual eporoath to estimate the stand-alone seine price of 0 s00d or service where the discount is allocsted entirely to one or more performance ablaations in the contract 5 |ALLocaTion oF A DIscoUNT | the entity shal ellecete discount proportionstaly to all performance cblistions on the Ina of standalone soling prices of distinct goode or services EXCEPT when entity has evidence that entire discount relates to only one or more, but not ll performance bliations sii aE ‘= luhen to aleate discount to ‘ess than all performance oblietions? + The entity ako regularly sella smaller bundle of some of those distinct goods or services ot a dicount; AND + Discount cbtribubable to the smaller bundle of goods or services is substantially the same os the dicount inthe contract and an analyis provides evidence of erformance obligations to which entire dicount belongs: aLoca’ s.6 CONSIDERATION | versble consideration mey be sttributable to (i) the entire contract or (H) a specie par’ of the contact “EXAMPLE |a: contract _may include two performance bastions: Construction of o buidimy and —[eevision of services related to ongoing maintenance of the property after construction But 0 bonus for essly completion moy relate antiraly t0 the construction of the builds if vorable consideretion relates to a part of contract, then entity should allocate friable Consideration (and subsequant changas + that amount) only to thot parb- But ie versble consideration relatar to the entice contract, then it should llocate the variable consideretion to oll Performance Obligations in thet contract in the ratio ofstendelone price ‘CHANGES IN TRANSACTION PRICE costratt inception, the transaction prite can chonee for various ressons The llowing princiles should be nated: + An entity shll allocate to the performance oblastions anu subsequent changes in the transaction price on the same bets of ob contract inception Consequently, 00 -stity shall nob reaocste the tremaction price to reflect changes in stand-alone ling prices after contract inception: + Amounts allocsted to a satisfied perforinance oblastion shall be resounised os revenue, of 06 2 reduction of ravenus, in the period in which the transection price changes (ie tive effet). HE the change in transection price is the result of o contract mdifeation, the enkity should flow the contract modification audance Sr eee eee ee ae |STEP 5: RECOGNIZE REVENUE AS AND WHEN ENTITY SATISRES ITS PERFORMANCE OBLIGATIONS poate ae Jn antiey shall ecoynise revenve as & whan the entity satisfies « performance cbgation Joy transfering « promiad goed or service (i'l an asset) to a customer fin octet ic ‘ transferred whan the customer obteins cantrl of that artt \conTRoL. |conTRoL ee ee [Control of on exset refers to obiity te direct [the wie & abouin substurnilly ll the benefits from the esset OR abilty to prevent others from directing the use of the A ee eee eee ee en ee ee in addition_an entity shall consider indintore of the transfer oF tonérol, which incade he folowing +The estity has a present right +2 poyment for the anets 1 The customer hes lage! tite t0 the axe +The entity hos transorred physical possession of the ws + The exstomer has the significant rise and rewarde of ownership of the arse‘The customer has excepted MAY BE TRANSFERRED a F Tr ww Time. eee ic OVER A PERIOD OF TIME ‘ATA POINT IN Time] ‘in entity transfer contral of # good on service otind lover time and satisfies 2 performance ovigation crest ier period of time is & recognises revenue over time if ANY of the neta following enter ie met te recognised ob 2) teed er TT oY ents retorts dow | receives & consumes ‘or enhances an iirean aon with sla eee ena enforcedle right to stems OR here, OF compte to dre {his Refer Nome | [ite Refer Note Fie Beer Noes Note 2 a [consumed by the customer Hence. in such situations, entity's performance is said £0 be performed over period of time Example: Routine or recurring sarees ~ eg: cleaning services, Routine transaction protesting services, Hotel management servicesNote 2: ch casts, the customer ordinari il contrel of the aust whots work is in cess ond therefore, the entity carving out the work can resoenise revenue over ¢ | ecomple: Construction where cantrachor enaoses bo conttrict @ spate asset for the customer on customers lind LHI | —__|wore 3: tf | tie crt aron is mat if two factors exit 1 Aut sented deer nt hve an [| 2, Lem antic rite to exes aernate use to the seller fea et —_— date | ~ CONTRACTUAL RESTRICTIONS - A =n entity has «right to payment [— legal clause which restricts the salar |—J that a least compansates for — from redirecting the aet for another performance completed ¢0 date when | se or sling the asset to another customer terminates the contract for customer; OR reasons other than entity’ fur: + PRACTICAL LIMITATIONS ~ Ie exist + Compensetion should include coste — [— J] when considering the nature of the incurred for work complated PLUS a [>= ‘asset, seller entity would require reasonable profit margin La Incurvog significant economic lores to separate P-O- end entire ‘revenue shoud be attributable to the 25 « separate P-O- and a portion of _ 4 lstines service & should re accounted transaction price shoul be allocated — Ls tof However, provitinn for warranty should rend oper mi as 27 ln onessing whether o warranty is o separate P.O- or nob an entity shall consider factors such a ldhether the warranty is required by low ~ iF required by lw, ib indicates thet the levomised waranty ig not 0 performance ablation ti] tenath of warranty coverege peried - Longer the coverese period, the mare likely 1 i that the promised warranty is separate performance ablation: ui_|consi6NMENT ARRANGEMENTS. JA consignment egrezmant is an aareoment betiveen 4 consignes and consinar for the seorsge, transfer, sole or ressle and use of the qaade- Entities (Consignor) equantly aver _imentory on 2 contianmant basis to other parties like distributor, dealer ee = [indicators co evaluate whether the an lin. rangement ip consinment arangement 2) the product is controlled by the entity (eonsignor) until specified event occurs uch os the sale of the product to « customer of the dealer or until « specified period expires 2) the entiey Cconsgnor) is able to require the return oF the praduct or transfer thei roduct to o thi such 0: another desler e) eke desler se dost “ onal to pov for the oduct until the goods are sold to the ibimate or end customer (althovsh it 2 deposi in case of consignment arronsements, revenve would NOT be resoaried when the goods lane delivered to the conignee because control far not yet tramfered: Revenue i peccunzed when the entity har tranefured contrl of the seeds to the consapor or the [end consumer. A consinment sale differs from a sole with o right of return The costomer hes control of the goods in a sale with right of return and can decide whether te put the goods back to the salle In cate of consignment soles, the consignee does not have the contral aver the anode. SALE & REPURCHASE AGREEMENTS [a repurchase sqreement is @ contract In which an antity sell aseds and alo promises or has the optivn to repurchare the goods» Repurchase egrezments eenwraly coms in three forms Put Option: An entity's obligation to repurchose the asset at the customer's request in case of repurchase agreamants, revenue should not be recoarized os the customer does [nce obtain control ability to direct the use and obtain substantily all of the remaining benefits from the aseet) aven though the customer may have physesl possession of the consequently. the entity shall acount for the contract as either of the Following"REPURCHASE AGREEMENTS} (FORWARD 7 cate ¢ PUT) $$ Repurchase Price it more than ar equal ba {pune Price i ss than Oriel Selng Original Seling Price Price (Ep: Orginal Selng Price i TO lakhs and (Ep Original Seling Price i 10 lakh and Repurchase Price it 1 las) Repurchace Price is 9 leis) “anaing Arangamane (ar pos WD A 103} ie reaps the cnaeraion read (70 tease Contract (spar IND AS 16) in ats) as Financial lability tohich diference between original sling [—] price 10 lobhs) & Repurchase Price (9 lath) shal be recognized af late income ‘over the period of lease: ‘Also recognise difference between Original SP (10 lots) & Repurchase Price (11 lakhs) 48 Finance Cort over the berm = lie the ation lars unesercsed, an entiey shall dereceanize th , ——=| the shove trestment would be dane for options only i che antity azbimeter ot the ” ace io sipihcont econo to erste ete ention set tive should be evauntad fm the eption hs leerspective by cemperine the resurchote price with the expected market prize: If the eurtomer does not have 2 sisnifcant economic incentive to exerci Jes rit. th lente shel eccount for the esreament ot sale of « product uith o right of return —— eens If the repurchare price is expected t0 exceed the civesbad markes wlue of the cust sie may indzet that the customer bap sanifcon? economic incnth the repurchese price expected to be less than the expected marked value of the sah thie mav idiate (alona with ather factors iF anu) thot the customer dace net have sianiacont economic incentive to axercite ies rat (out optionwe [pte aw HOLD = | pil end hold erranaament ie 2 contract under which on entity bile o customer for 6 duct but the entity cetsins phuszel poserion of the product (at customers request lnecause oF customer's lck of aveable space or because of dlavs in customers production schedules) in sich arrongemants, the entity shall recoenise ob the pint of time when control ie tranefirrad t0 the customer: In come cates, control is transferred cither whan the product is_daivered tothe customer's site, while in other cates. 0 customer me control of « product even [hovsh that produce remains n an entity's physical posession Irie « customer to heve obtained contrel of « product evan though the product remains Lin an entity's physic! possession (re Bill and Hold Arrangement) ALL the follwing leriterio must be met “a) The ceezon for the blbend-hold anrengemant must he substantive (for exarple, the customer has requested the arrangement By The product must te dentifed separately os belonsing to the customer: e) The product currently must be ruady for physical transfor to the astomers and. 2) The enticy carmok have the ability to wie the product or to drect j¢ to another customer st Ldhere an entity recognises revenue on bil & held bess, the entity checks for addition! performance obligations (for eg: custodial services for goods held) and alesate portion lot on price bo each performance oblgation LICENCES OF INTELLECTUAL PROPERTY Recognition oF revenue Far lentes of intelectual property (Eq: software and tchnology Imedia_ond entertainment (2g: motion pictures and musi, franchises. patents lrademarks and copyrights) differs from the recognition molel for other promised goods lend services [a teence wil either provide: A right to acess the antiey’s intellectual property throughout the licence period,which cesses in cevanue thot is rezgeized bver time: or A rishd to use the entity's intellects 2s it exe ob the point in time in_which the cece i aranted, which résulee in revenue that is reeparitad ato int in Alieur 10 access IP rover Te) la criteria muce be met 2) The entity is the contract) or veosonebly expected (by the ustomer) to undertake activities thot sanicanty offct the lensed IP 2) The Wzence exposes the customer to any effucts of the antity's activities ©) The entitu's actvtig are nob 2 parformants oblast under the contrace She ee ‘has crested ¢ populer television show called —Chhota Shears Pose forents « thrse-vear iuense to Toy Manfachurer for use of the character f=chhote Sheem on ite toys As per the contract, Pogo will continue to produce fhe show, popularize the character, cary out marketing actities. Toy Manufacturer [produces and sel —=Chhote Bheem tour In this case, the lcense provides lacess to Pogo's Intellectuo! Property (1P)- Pogo wil undertate activities that sanifcantly offact the IP by production and marteting of the chow development of the Jcheracters Toy menufacturer is directly expored to ony positive or negative effects by Pogo’ activites ie-_how the show is recived by kids and their perentsr These activities lace not seperate performance obligations ot thay do not transfer « good or service to [Toy Menufecturer seperate fram the Hearse! Hence, Pogo will recognize revenve over fie a a ee 5 [Risur 70 use [tea 3 ecitris for acure (over time) are nok tet, the nature of the anity's rome [is to provide o right 0 use the IF at it existe ab a specihe point in time, the customer 5 control aver that intellectual at the beginning of the pariod for which it Ines the right to use the intellctusl property effectively, thi meons the customer i eble to direct the use of and citin all remaining lnenefite from the Acensed [P when gronted (ie the IP is static—xe} 08 ‘CONTRACT COSTS Contract Requicon Core ee Ton reared sncamartal omen {Ca eared Fit cared whether or no to otean 8 fling « sr vot conrad contrat is conerae tit contact oe eda any Ib 45 btanad or not truld not be FY covered ander | mead anther Sarherd apeiad oben ind 45%) HY se fr ch cores | — eee) Pree provided AUL conditions J— Pa) re met ‘Recognise as Asstt me 1 Cost directly relate to scons for thote Copal) if te these | cone (rut act ‘entity expects to er ‘material, direct labour, —§ [>= + ‘recover it aoe ‘other indirect cost of ee a ee OTE 1 oe chonce ersures of smreienon icy that wit be used | pid of the fo sti perirmance sear or lan then nb i boca (Entity expects to incertae ee ea rs = 2 ore fl be ae | + General & adminvtrative conte thot are not explity chareacble to the customer + Coste of wasted material, labour, or other resources that were nob in th contract prices+ Costs thet relate bo satisfied performance oblastions ete 2 | EXAMPLES OF CONTRACT ACQUISITION costs | Feasr ‘CAPITALIZE | REASON EXPENSE Commision pid only | Captaca | Assuming the entity expects to recover the cove po sucess signing of the comminion is inramental since would net F-— a contract Inve been paid If the parties decided not to enter} — into the arrangmant ast before sn Travel expences Tor sales | Eipemse | Becnute the costs are tured repardan OF] persone etching «naw Whether the ‘ew contract is won ar lst, the lane contract laneiey expanses the corte, unless they ore -— expressly rambureale Lif Taped tas far dating | Eapersa | 17 tha parson alt away Qing RepetaTn Te terms of ersnyement for oss would stil be incurred and therefore are nob ports t0 approve end Ineramerel costs of abtaning the contrac: ——] Sires for ales people | Expense | The sales tre cared raged of whether} working exlsively on contracts are won or lst end therefore are not 2besinng new elante incremental costs to obtain the contract Bonus bosed on quartery | Capitalize | Bonuses bored solely on anlar are sles target Incrmanbel core to aban soneratt a ‘Commision pail to sales | Gapialza | The cammisions ere incremareal corey that wa }-— manager bated on (ot have been incurred hed the entity not obtained contracts obtained by he contracts Ind AS TIS. does net diferantate he soles manager's local costs based 00 the function or title of the | employe, “employee thot receives the commision 4 |AmoRTISATION & IMPAIRMENT C057 5 A *lpmortise capitalised contract costs ono systematic bate consistent with patter of eransferring goods or services Any change in expected pattern, ie acounted 05 @ change le estimate 05 per IND AS &- peso stem AD i: ere ee eB Wee eee Baa = |Recagnises en impairment oss in cernings if learying amount of an asset_exceads Jremsining amount of considertion LESS directly related contract costs yet to be recognised [estore recognising an impeiment 10 under the\eeiehue recegntion guidance, 2h entityxe] peccanites impsirment lost ewocisted with ossebs ralated ti rset that are accounted in ctcordance wit a ‘ewmple, Ind AS 2, Ind AS 16 and ind 45 38) Reversal of impairment leet it parmitted when impairment condi yr ish or hove imoroved- The inerevsed corryine amount of the asset shall nob exceed the amount het would hove been determined (nab of amortisation) if no impsinnant loss bad bean vised previously (Same 26 IND A |senvice ION ARRANGEMENTS = ‘ABOUT SERVICE CONCESSION t— |— ‘ARRANGEMENTS PaRnEs Ps Such sypes of arrangements involve the [| Grantor ~ Ie is « Public construction of infrastructure used ta ‘uthority (Ey: Gove Body) -— provide puble services: 1t ose involves ‘that grants the operator | Ul operating and maincining thet infrastructure contract to conreruct/upsrede far a secied period of time & operate that infrastructure fee dso called the "Buld-operabe-transfer* for @ specified period oF time: [— (8-0-1) or "Publie-torPrivate” service Operator = fn entity - concession arrangement constructing & operating the ie i cf the public service nature because it infrostrucbure: The operator ie | has some involvement of infestracture which eid for ies zervices over the [ is used by the general publ te can be period of the arrangement bridges, roads, national highways, ete ‘ACCOUNTING PRINCIPLES: eb in| oF the fs rights over the infosbruceure 2 lineoctrscture under thie arrangement. shall not be recognived x PPE by the operator lie is because operator docs not have right co control the use of puble service lnfastracture: But yes, operator has access to oparate infrastructure to provide public service on behal of grantor in accordance with tems specified in contract io Recoanition and measurementIs LH [Ooerotor (acting os a service provider) shal receanize revenue in ecordenie with Ind 6 Lis. le the overtor ic performing more than ond service (Pes cantruction serves ond lonerstine services) under a sinale contract. thelconsiderstion recened or revivable shal be olocatea based on the fir vile of the services provided: ‘t) Consideration given by the arentor to the opersiar = |The grantor can provide the operator with the considarstion which shall be receunized at air value tH CONSIDERATION By GRANTOR TO. | CPERATOR emcees Right to charge users of publi varie Unconditional righe to receive CASH ar : |— another financial asset fram grantor For es eee eee constructing a public rector asset and ronda sah iene tar shor apenas a cna att wed [| becuse amounts ae contingent on the | — extent to which publ uses the service [_Receirse © Rshe to Franch Aare Recoynite « Right to an Intangible Ace ‘Acccunt the FA under IND AS 109 (ar -— \—- ee ee Arely IND AS 36 for measuring ae Intangible assets acquired in exchange ‘and smortzing such Intangible Asset |-— ‘Ase Recognise Finance Income (in cate Of ACO & FVTOCI) based 07 EAR MW ator is paid for construction se ly by 0 Arancil eset & portly by an intenaible eset, itu secassary to excount separates for sath component of the everstor's considerationind AS 16 shall be applied to ALL LEASES, including leases of Kight-obUse (ROU) essets in 2 sublear, EXCEPT for + Lewes to explare for o” ute minerle, el, natural gar and simier non cepenerobive resources which are within the scope of IND BS 106 Lessee of biconical estate bald by 2 lessee which are uithin the scope of IND AS. a + Senice Concesion Arrangements which are within the seope oF IND AS 11S + Licences of intellectual property qrented by 4 lessor which are within the scope of IND 45-715 1 Rights held by o lessee under licencing egreamants for suh items os motion pleture fms, video recordings. plays, manuscripts, patents and copyrights which are within the scope of IND AS 38- NOTE: A lessee may, bub i not required to, epoly Ind AS 16 to loses of intongble sssets atier thon chore described herein xe ai IND AS 116 [a lessee can elect not co apply Ind AS 116%: recognition requlremants t2: Short-term leases: and Lents for which the underiing acetic of lowvalime — a SHORT-TERM LEASES: leis lese that at the commencement date hac 2 enix tarm of 12 months or less and does not include an option to purchase / renewal (beyond 12 months) the underlyinglin cate there t an option of renewal (beyond 12 months) at the commencement dete + Such Option a reised= Nob a Short-Term Leste + Option is NOT Reasonably Certain bo be exerted ~ Short Term Lease [as oe determination is made ot the commencement dete, 9 lease cannot be clssfed at rahe of use relates. term ifthe lease term is subsequently reduced to less than 12 months The short-term lease exertion can be made by clase of underline asset t— which the | LEASES OF LOW VALUE ASSETS i lahich on asst can be trested os of low-value: ind A5 116 does not explicitly define low-value aeets, it provides the conditions based on - The lttan cam befeht from ute oP the underlying ascce [-— 1 can be low valve (nits own or together with other resources that are | ONLY IF BOTH tose Bee ee readily available t0 the leczeas AND [= : + The underlying asses is not highly dependent on, or ove satisfied highty interrelated with, other orsets iF — |For example, on entity entere he election for leaes of low value con be made on a leae-by- leva bot 20 a rantal contrat for a large aymber of lastops Each lastop within the contract constitutes an identified stat sntity as considered thot the velve of individual lovtop would be lou, even thoush the contract forall the leptops is nots The conditions of ind AS 16 are sshished ‘e-, the entity can beneht [om use of an individual liptop tosether with cthir resources that are arsedy avaiable land each ltop doce not need other assets toi make it funcsionsh Consequently, each — se dees not osed other assets to mols i functional Consequently, each laptop cuales aso low value asset end the antity can elect to soply the louvalue ease of an undariyng aset does not aualfy a4 u late uf low value asset if the nature lof the asset i such thet, when new, the axtet & typually not of low value (For Brame: loses of second hand / old care would ot quclfy 0 leases of lowrvolue sete [becuse a new car would typically not be of low vaio.) load leases do not quality as low vali axsebs: ia lessee subleases or expects to sublease on attet, the head lease does nob qualify 2 =fase oF o low-value cust, ie, on intermadiote lesor who sublessar or erpechs to sublease an asset, cannot account for the head late eet Ge Ue a lstan cleets to epelv the sition exemption, the lssee shall pecounie the lee payments asscioted with the et a0 erpense on sitar ixeaht-line bois over the laste term or another sysbemabie basis 3 lunar 1s a wenser = |in> AS 16 requires customers & supplars to determine whathar « contract io lease ct Tete weer rion ofthe contracts ‘4 contrac, or part of a contract ‘thet conveye the right 0 contral the use LEASE is defined 05: oF an identified seat fora period of time in exchange For consideration KEY CONCEPTS RELATING TO THE DEFINITION OF LEASE ‘Al INCEPTION DATE | the inception date i defined 1s the EARLIER of the Fallowine dates ‘Date of « nore sreements OR [+ Bote of commitment: by the partes to te principal terms & conditions of leate 1 |COMMENCEMENT DATE [ie it the date an which a lessor makes a underlying seat avolable for use to the lcon |The timing of when leaie payments beyin under the contract does not effect the Wiese erasesINCEPTION DATE COMMENCEMENT DATE |— “Date when an entity shall assess if the| |» Bate when « lessee initily recognier Contract contains lease or 1 4 Ioarelbity and ROU Arnet AND « [— Iesor (For finance leases) italy — | recognises its net investment in the bease (ve Date when Accounting starts) alte a ther « contract convays the risht to contral the use of an identified asset for © psriod of time, an entitu shell eters whither, throushout the peried of uses the ustomer hat both of the flowing enti asset; and iantified accet ee hl ee ee RIGHT To OBTANY $1 ALL OF THE BENEFITS: [A customer con obtain econmit benefits aither directly or indirect (far ea, by using holdine or sublensing the agtat)- Etonomie benefits from use of an ait include 2's primary outputs, + anu burproducts (for w9:, renewuble enaray credits that ore qunerated through the use of the are | + benefits fam sublesting the sotet _b)|RiewT To DIRECT THE USE OF THE IDENTIFIED ASSET Tos customer (lessee) has the right to direct ohe yse if rubstantol decisions about how land for what purpose on asset will be used and detent resting where and when the lsset is to be used i taken by the customer (ie: Customer hat the decision-making rights that wil most affect the econamie benefits thot will be derived from the uto ofha esse In some dechions related to how en oan eased is sed, ore already spaified (ore-determined) inthe contract che ware term mance The customer red to have raht to control if + Customer 8 taht to operate the etset or direct others to gperate the asset ino maner the custr mines throushout the period of ‘Supplier should not have the right ta change these operating instructors): OR The customer bas designed che occet tn such @ way Unt ic pre-determines how & sehet purpose the asset would be used : 7 ft ta ited etek Probes ee ore intardad F it - vd rasulations) sod miakt ete the a 2 se, o restriction op where ead on a cea sions lan ss ie ut atest An antiied eon be: . ie 0 oR + Imolsitly spesiid ob the time thet the asst is mode evelels for use bu the‘AN ASSET IS IDENTIFIED ONLY IF: SS ee > Sar Prac te substitute Economicauy A suppliers right to mbsteute an ate ie SUBSTANTIVE hen BOTH of the flowing “Suppl DOES NOT Tava Sabana Substitution Right: |__| 2 Aisee is Phusely Dasnee ee Te may em oe ah or prin oP me he ct one ft en bay J ty ao b con phycty dons SSS ees sever Siri carton ats hare we et the {— he eee ICAL ABILITY ccna praesee ‘there iso Mentited acct unless subiontaly [| at oF the copay seed ("Substantial hroughout the (ight to eubttae . Fo isie oot 12 at defined in Ind 85 118) } riod of ne J = |wore: ir supplier het « right or an oblyetion to cubstizite the asset anly on « partiuler debe, Jor on occurence of « specified event, the supplier's substitution raht is nob substantive ehroushout the period of use because the cuppller does not have the practice! ablity to substitute aleertive assets Jase, if swpolar is required to substitute alternative artets only when the underving asset is not operating properly (for war, 4 normal warranty proviion) do nob create 6 substantive substicution righ io entity's evolution of whether « supplier's dubstitution right i substantive is bad Jon facts and circumstances at Inception of the contract and entity should nob consider future events that are nob italy bo occur lind AS 116 further clries hate curtomier should presume that _ suppliers yind AS 116 further cleriies that _« customer should presume thot a supplier's [rubstitution right is not substantive when the customer connot readily determine lshether the supplier has 2 substantive substitution right=| ip simple terms, late term is the summation of in Baro cored by ‘option to Yerminate (GF resonaly certain thet option to terminate uit NOT be chad) Th Lease bar bose ot he lente commencement dite and the assessment of whether @ lessee_will_ exercise an extension or termination option should be sone on lease eominencsine date fn entity should consider ol relevant fcte and citcumstances that ere cantive for the lctee to etarse or nob to exercise the option, ining tad same oF factors that ill create 0 sy it in facts and creumstances from the commencement date until the exercise date of the eption. i economia incentive to exeris the ostion chide Premium Location of the wmderiying areet, incurring of sgnicant_loatakeld vovements@ below market late rent in the optional sored. et The shorter the non-canclable period of o late of « significant asset, (for ea lease of corporate headauarters, ot other hey PPE), the more key o lssee i to exercise on aption to extend or not to exercise an option to termineter This is becouse the conte associated with obtaining « replacement arcet are Daly ¢0 be proportionately higher the shorter the ron-cancillole patiod- We wil also depend on the sinihcence of the underving estes to the lessees combining operations CANCELLABLE LEASES: = |any non-cancaloble periods in contracts that _mect the definition of ¢ lease ore onsidered part of the late term in case the contract of late ix cancelloble at any time or ofter the end oF the nor earcellable term, then:Tf both lessee & lessor can terminate without any significant penalty only the lessor haz the ight t0 terminate @ only the lessee has the P— eaee ease 2 Than there are wo The period covered by "The period covered by | enforceable rights and ‘the option to the option to ebigotions (ie: no ‘terminate the lease is terminate the lease is covtract) beyond the Included in tha 290- Included if esse hos |-— oreancallable term (ie, the laze term ie carcelable parod of the leaie (er lessee hat on continue (ie: ot linited +0 the non Lebiyetion to hake the terminate) & exclude in anceleble erm) posments) cae lessee hes 10 exams Suppose the term of « contrac is 10 years and the non-canclabe / loin period 2 6 sar The lease term shall be of Follows: i with ‘Lessor? |f the termination option | Ifthe termination option fr with "Lessee! IF the termination option 4s with “Both? (re ang party can terminate) The lease term shall be 10 years: Reason: Because even sheer 6" year, the lattes would be contractually bound to Inake the payment until 10" Year and alto, hoe right 0 use the arret until 10¢h year, unless lessor terminates the The lease tern thal be 10 years assuming rearonable carbine Reason: Becaure ofter the expiry OF 6 year, though the lester it ot contractually bound till 10% year, but i is oreumed that lessee is reasonably cqrésin that 16 wil not exerice this option ¢o| eerminate: Leste term wil be 6 Years in cave lesen has The leare tar shal be 6 sears Reason: Because after 6* year ethan party can terminate the contrece wrehout concert oF other erty and hen contract 1s not anforeable afeer LETT] 6 year provided there ie| Insigniteant/no penalty for terminationlense ream | Jeeee mav enter into 2 laste contract for nor-consacuive perlads: This is seen in bh rota in 1p cetsiers enter into contracts with shospine centres to lease the same retail space for certain notrconiecutive monthe of the wear (ee, durin an annuel lneidey period) Siler arengemante leo exist when sports beams lease o sports stadium for partizulor non-consseubive deve of the year These ar ee will urvellp meat the lucGnition of « lease becouse during the epreed period of use, the customer controls the ight to use the underlying attet- In these arrangeroents, the lese farm is the agarsgate [oe the non-consecutive periods «& | REASSESSMENT OF LEA: ‘AND PuRcHA’ lan enticy is required to reoseess the lease term upon the ceeurence of either a significant event OR o significant change in the circumstance Evamplas of saifcant events or significant changes In circumstances: = Constructing sanifean® leasehold significant economic value for the lessee when the onvion becomes exercisable iting a business destin thot_ie directly relevant to the lssee's ability. to crete, or not to erercsa, an option (ea, ox the tease of 0 omplamantary atet or disosina of an abenative eset [= Sublessing the underiving eset for a period beyond the exercise date of the option improvements that ore expacted to have F LEASE Paymenrs esse payments are defied a8 paymants made by a lesseo toe lessor reloting #0 the right to use an underlying eset during the late term alte comprising the fllouine:Ted pagrnents (ila TUbabanae THGd PayMeNtay, CESS ay Tease 2: Variable lease payments that depend on an index or a rate = FBaarene ptt Fa Pah lexercite thee option “pelan Whe Tasten 7 Teaiaraoy Te Fie OF panallee Tar barinstng Te Tata, tha Taka arr eects the lessee exerting on opion te terminate the leae 'S Far tha Taken Take paginants aia Tle amounes pasted to Be cble by the lessee under residual value guarantees a a a the lessee a party related to the lesen or 4 third party unrelated to the lessor} — + Payments located to nonleste componente (ues lsee opts for wig Pract] ipeion to oot to spurets teless oman Variable ease payments that do not daped on indet or rte 2 lene teze permis Thay refr toa determinate amount £0 be paid which con ba ether ba a sgl cath yar [(Etample: 5 weer equipment lara with annual ayoants of % 20,000) or they can be payments that change over time (Geample: lose payments of € 20,000 par month o€ leat commencement thet icreete nnuely by € 2500 per mont Dire ‘xed lee paymante =| These are_paymants that_may in form contain variability but, in substance, ore lunevodebe Examplas may include | + if there is more thon one set of payriants, but only ane of these its oFymants i reslstiy- In such o case, coosider the realistic cat to be lose + U6 there ig mare than one resis seb of couments, but it mist mole et lease one of those sett of payments: In euch o cose, consider owsst sat of poument to be leote coumente ects incent | these are payments made by lesor to a lessee ‘camel: senina bonus, ceimburtament of conte incurred by lessee sich os movin transportation expanses abe “=| mee pouments reduce the cath outflow for the lett, thev are delustble from lose [pevinents = Variable ease peumante | these payments that varies becouse of changes in Farts or circumstances occuring after he commencement dite, ather thon the passage of timeLinked to index or Rate (Es: Consumer Price | —T NDT inte to Index or Rate (Ep Pucantage Ides, Benchmark Incereze Kae like UIBOR) of sles based on number of writs produced) Ge Tneal Measarmant, here payments we Included in the leare pouments and are measured using the inden or rave on commencement date (These payments Chat Toot dopend on ar} — Indes or rate are nob included as lease payments: Instead, they are recognised in PRL as and whan they ore inarrad Ta soTie teh Te Varaoiiey may Fe ‘resolved during the leare term, 19 thet |— (On Subsequent Mesturementy these payments wil be remessured only wher payments vecome Fixed for the reminder of }— thare 1s change in cash Flows using the index the leare term: The new fixed paymante | oF rate on the date oF change in cash fous are than used to remeature the leave Liobey (uith an offset ba the ROU facet J— w)|Exerise price of « purchase option JF the lessee is reasonably certain to exercise a purchase option, the exercise price is included 05 alesse poyment ee ie 2 lease |i ie is reasonably certain that lessee will not terminate « lease, any termination penal las 2 tact payment Se ee eee eg Wi} Guaranteed Value (BRU) a Eee pee ne LLFOR LESSEE FOR LESSOR TA lessee may provide a guarentee to Find 5 116 requires lessrs to include the lesor that the value oF the (nthe leate payments any GRU underlying sera ie returns to the provided ¢0 the leszor by: ia: lessor at the and of the lease will be + the lessee, Fa ‘a least of specified amount se porty related to the lessee: OR | + For ¢ less, lose payments include sa third party unrelated to the lessor [__ amounts expected to be payable by that is nancial capable of ie aes asd RV dlicharging the abigotions under the [— 1A lescee Ie required to remenire the guarantee |— J+ This amount included in the lease |__ lease labty if there is change in ieee escr e etiae eymants is diferent Fram thot for 6 nieeR lessee which only includes the amount ‘expected to be payable by lessee only ——s/mmar pingct costs ___ ital direct costs’ are defined of the (nirumantal costs of abeeinine 2 lease that would act hnve been cured If the laste had nt been obtained Examples of cotts included and extded from intel diract costs Is prvided blow: | aed Beaded eo | ammiston Coca poymers to employer | Employee larier oo acto cling egents) “egl Fes esting Rom the econ OF Wha Layla or reas randered foe the | decse execution of the lease | BRE. [7 Lease document preparation costs incurred Negotiating lease tarm and conditions [after the execution of the lese artin payments ta exiting Wonantt Fo wove | Adveringndering ase measure o lstor's 0 ment in the lease 17° Priority ~ Interest Rate implicit in the Lease (ie: Lessors (RR + 2° Priovity = Lesee's Incremental Borrowing Rate Interest vate imple in the lace Cie Lestbr's (RR) et in the Lease (e+ Lessor's IRR) = It is the rate at whith PV of cosh Outfiows (ir Value of the Underlying Aszet + Initial Direct Cost) = PU of Cash news (Leese Payments + Unqusranteed Residual Valve 5 Incremental 8 Rate — Ie is the rate ab which Less additionel funds over similar terms, with similar security for the same_emount of |SEPARATION OF LEASE AND NON-LEASE COMPONENTS a and _multile lease componsnts Ja contract might contain rights to use multiple susts (for on, « building and an Jscupment, multioe pices oF equipmene, atz-)- The right to use cath sich oet is eonsidered as 0 ‘separate’ esse component ONUY IF BOTH the follwing canditins are ated 4) The lessee can benef rom The OF OF the azzet either on ite awn OR 1b) The underlying asset tx nlehar RAB dependant ot, nor highly interrelated together with other resources thet are readily avilable £0 the lezees AND eth, the other underiving assets m the | — ie one or both of theve criteria are nob mat then, the right to use multiple ossets is [considered @ ‘singlet lease component er, not o ‘seperate’ lose component—# 1m norlease components there mov be many contracts containing o late & 0 ye te purchae lar sal other goods or services Such other agode or servicer mov Se non-lease The nor-lesee componants are ientitied and ots separ he late samponent in accordance with other standards exampue + A supplier may lease 0 truck ood also provide 2 driver oly the ute of the truck i consilered a lass component: |More: costs related to property totes and insurance DO NOT involve the transfer of Jaco or services Consequently, if there costs are fted in the contrast, they should be nclided in the gverll contract consideration to ba allocated to the leese ond oonlats -ccimponents a +2 | apiona us to nab Pa | optional etemption of using Practical Expedlant to not to separste non-leate component is ovalable to the lestee- Tht expedient is nob avalable for lessors 7 [essees thet make this policy election, wil allocate ALL of the contract consideration to the laze comeonent MOTE: The _prestical expadient does not alow lessees to sciount for multiple late omponants of « contract at « single lease component Valoesting the 2 e cr [Allocote the consideration in the contract co che lene wd vorrlewe components of @ relctive stand-olone price bass (provided in case of lstee if he does not ope for practical expedient Use observable stand-alone pres (re, prices ot which « customer would purchare @ [omponent of contract separately) when ovaiebler(F observable stand-eone prizes ore [not readily available, astimate stand-alone prices, mouimising the use of observableinformation ——Syeowteacr compmations ind 5 116 reauices thet two or mere contracth entered into eb or reer tha tame tine ith the came counter lated parbies of the oo cilered anal’ contrack (E ANY ONE of the flowing ceria is met + The contracts are negotiated 0s 4 pechone: OR + The omount of the consideration #0 be paid in one contract depends on the rice or performance of the other contract; OR + Aller some of the Rishts to use the eselte in cach of the contract are a sinle lezee component 7-|Lessee accounTINe [At the commencement date, o lessee shall recoprica « ROU Aset_and a Lease Liabilty (except for short=tarm leases and leases of lou-vulue ats, If they choose +0 apely such re ee eee 4 ROU Asset Ale Dr To Lease Liability Are eaniae| ‘INITIAL RECOGNITION AND MEASUREMENT EASE LIABILITY T ROU ASSET * Leese Lisbilty iz measured at present | A lrtes Witally maauures the ROU Aart ob vie the remaining ease poyments| COST which consists of ALL of the (discussed carler) ¢0 be made over the flowing lease term, discounted using the rate limpcit in the lease (ar if thet rate| Initial Meeurement of lease bitty cannot be readily determined, the| (+) Payments made before commencement| lesse's incremental borrowing rate)- | Dete Mote: Lease payments used in measuring | (-) Lease Incentives recaived beforeha hits Eliya amontls dn 19 | ommuianatt Date ia the her echeg ary popes thet o| (9) Ini! Died cont (1c). nur by] see see oer ee | as rE (1) PV of Ducanmisig / ite restore | In/MAL COST OF ROU ASSET fm 8 SUBSEQUENT MUASUREMENT =e TEASE UAB ROT AST a Fae Tag ll be aarted > Atari carasanané te OT ot | ea cea ecard any tear ae tubes (hon 0p amard nt] uns (© aps the romain mete es] — seo) spte ender nd A516 am Tan afar te commanamart date, ol Cat mab for ROU fat iia teas shat ranars the ate Wait) Ill tarranant of ROU aut (at cst) [ » Pica terse a) Linea tie“crgly esc “dC Renate mapas hee ant ToS ahora os’ eso: | 97) ein wees of tel) iyo the” crpg sure | et ay dbo racrsment 7 ae) tata hs eas pomarte made, nd | meliton (Ded Leer) a i saemeante te eee sa refuce any rosmasimant or tne epracetin for ROU ats ira) Scotus (ral tte) |ROU ante bid be deprecad ovr tal | ieee ions, sates 6 || Pamela 5 al 0 se] Cred by the hrs then ho ett wed SAGs Late ate re i] tie and hacen these, ROU fs veal hdres oa cai e ( Aewdution med for ROU est am Paces reece eer as Pc roa teal of the ROU assets that real te tet ts of PPEOF investment property, then, revaluation model cannot be applied becaure at present |__ Ind AS 40 “Investment property” does not permit revaluation model and only cost model 1s allowed forall investment properties onaeaueal | However, if ROU assets mect the definition|___ the items in ox J 7 ion of the ROU Aiset + Variable aie pauments thot are nob included in the lease abby Cfor ge. vatahle Juste payments thse do 0st depstd an an inder or rate |LEASES DENOMINATED INA EOREIGN CURRENCY Lessons a AS 21 (The Effects of Chanags in Forsian Exchonan Rates), to leases [denominated in foreign currency: cove remessire tha Frain curraneyrdonaminabed laste Uabity wine the exchenge rate lat each reporting date {in Closing Kate), lke thay do far othe monetary labile lany chenses to the lave Hbiibe du to exthonas rate chon ee ROU Asset ie « nonemenctary antct which is to be returad ot hitoricl cost, it is nab Laviacted by chansee ip the exchenge rate [REMEASUREMENT ind AS 116 ceguires lesses to REMEASURE LEASE LIABILITIES upon a chance in ease Joaymants on account of ANY of the Following Cobher than lease madifeation(7 Rancesaran OF lence Farm ocoune J or recsonable careainty bo exercise /aot cxerise extension / tarmintion option T Insubstance fved laze payments 2 Future leare payments resulting From a change in an index or rave | 2 Reassessment of whether lessee is | reasonebly certein bo etercte an option to |_| The smounte expected to be peyebe T[eurchase the eset under BRU Ure Raised Dicount. Rave (Fe Rate on case Continue with Origins! Discount Reve remenurement date) am [accounting Entry to sive the affect of Ramessurement Wf Remassuremane results in Increste in Lease Libil ou assed Are Dr To Lente Libity i)| te Remessaremene results in Decrease Ip Lasse Labity este Liability Ae Dr To ROU Asset Ale aes | [MOTE However, if the carrying amount of the ROU Aset is reduced to zero and there is 0 further reduction in the measurement of the lease Uabiity, « lessee recognises any epaining emoun’ of the remessurement in profit oF 135 | LEASE MODIFICATIONS ACCOUNTING FOR LESSEE | ‘lease modification’ is a chanse in scope or consideration for 0 lease, that was not part of original terms & condibions of lease (For eg adding or terminating the right to use ane or more etsetn lating addltionol space in the same building, extending or shortening aaie term, ete=| n con involve + Chanee in Consideration + change 9 Tenure + Chanse in S:00e jan - Not » Sopareta EF eed awe a Pay ot L 2) Mediation inereates 7 change (Ierase or Datpassa) NF Betranss fe bets Toms the ope of lase by '» conndertion Dace cate ding the right 9 ase 2: Increase in aace Term fone or mare assets; AND 3 Ierease in seope (= ranting ona ight to use wept) but st stondeone price |_| rie or ierace in scope = IF both ertrie ae met than acount for the additions right of we as |-— 8) consdwstion for late i increases by standalone No ears lace babi sing reiad discount rate F Ramceare late Fai wg compared to ei! lee reviad dacoune rete: AND. (he: Proporionsely) Remecsire ROU eset by sine ea [wore exercise of an existing purchore or reneuel option or 2 chine ip asessment of [uhethar such eptions are reasonably ceresin to be exerizd ore pet late modications lout can result _in the remessuremens of Lente Lisbilties and ROU Assets [eemessurament ar dicuseed above]RoU fests ond lace Ubities ore subject to th era other assets abiies in closiving them 28 erent in the bolonce shoat~ The folowing table depicts how leaserrelated amounts ond activites are presented in inanciol stevements: “BALANCE SHEET ‘STATEMENT OF Fa STATEMENT OF caSH LOWS RO ase Depracition and Principe portan of the lease lebilix: They are prsanted ithe: Interest: Depreiction \« These cath poyments are preranted T+ Separtaly from ather assets Cer, [20 Right of use eset | within Bnancing ectiviiee Aouad axets) OR and interest expense Together vith other assets os if) 0” lease labiites ore | intrest portion of the laste babi J] shes were owned, with dacocures | presnted saprstaly |. these cath payments are presented oF the blace ohect ne tems thet | (a they CANNOT be |” stein fancng thts | incude ROU Assets and thei | combined) emounes This i because interest | Shorectam laces and loses of lor + ROU Ausets thet meet the defiton | expense on the leese| value eneten af toastmant property ore presenta | bility 16 0 component 1 sase payee partcnng to them oF investment property oF finece costs, in the” (. =e rot secoqnised 00 the balnce 3 thest at per Ind AS 116) ore presented within ITTTTTTT TTT Variable teste posmants_no¥ Vacuded Teac bes in the lease labile: rey + Seperate from other tabities OR | + Together with other Uabitier wich disclosure of balance sheet tne prcented either + These are oo presnted within Iams thet ines leare Uabibies le ‘teeor” ie defined op an entity that provides th set [at inception lstors casi all lates e2 FINANCE LEASE or OPERATING LEASE:Se ——aa [INDICATORS OF FINANCE LEASE lind AS 116 sts a number of indicators thet individually, er in combination, would Jnormelly lead to « late being clarified es » FINANCE LEASE: LL JOumerships Lease transfrs ourership of asset bo lessue by the and of ata tarm Purchase option: Letias has the option to purchase the asset at price that is expected tobe suffclently lower than fain vile at the date option becomes exercisable Wi} Lease term: The lease term is for major part af the economic life of the asset even IF eitle it nob transferred APY of Minimum Lease Payments: The pretend value of ase payments substentioly, 16; value_of th jets (The term “substantially al” i nat defined in Ind AS | Srecialed Noture: The osset ic of such « spatializad nature that only the lutes can use it without major moditzations ee a NOTE: Lessors are required to reassess the leave clssifeation ONLY IF there ia lease modification (ie. o change in the stope of = Inte, or the consideration for lease, thot wes not pare of the orginal terms and conditions of the lase)- I 0 lease modification [rests in a separate new lease, that neve ease vould be clstifed in the same manner 25 leny a0w lassen Se eeeFINANCE LEASE ; Tease Racaable A/c Dr (Net rvestent) | To Asset Ae (At Carrying Amount) (Difference if any will be transferred bo P&L) ‘Recoaniza Depreciation Depreciation Ae De To Asset Ale Recognize Leste Rent Income Bank Ae Dr Deferred Rent Ale Dr To Rent Income Ae (Leste Rant ara te be retegtitad SLM Basis o anless another baie more representative) Me Depa Recognise Finance [nome Leate Recsvable A/e Dr To Finance Income (P&L) A/¢ (using the lease) Incerese rate impli in the Receive Leote Payment Bank Ae Dr To Lease Receivable A/e ITLTTTT TTT TTT 3 Initial Direct Cost Thital direct coats ore Telided ie the carrying amount of underlying asset in an operating lease: These Initial direct costs are recoyied| 4 an expente over the lease term on the same basi ar lease name Trial drach casts ore Tacladed Tn the Wit Imeesurement of the finance lease receivable hich reduces the amount of income recognised over the leat term The interest rate impliit in the lease i defined in such # way that the initial direct costs are included automaticaly i the not investment in the leare and they are ot! added seporetely“4 Varah | Recognise income trom vanabie] Recognize come rom variable Tare payments lease payments that do not| that are not inchided in the net investment Pogmants tht trend on an inn or rte Cops] 9 the lore (o9, perormene- oF wate tot tered perermance- or ssge- bated based) varible payments) in the prod in ee [rere Cl ptt cel alone de cos that income is earned 5 yants rasivebe + Vague 1 0 | WlGUARANTEED RESIDUAL VALE = apectad Residue =) Guaranteed Resi! Value eR" is casidual value of the woders ” lessor Is not essured or is eranteed slau by o perby rot lessor ee ee = Present Volue of Groce Invectment (ve: PY of Lense Peuments + PV of UERU) ——talvenrnie einanice weome ee ee ee ee ors [Discount rite used should be the interest rote implicit in the lease (IRR of Lett) a Rote ot which PV of (LP + UGRV) should be enue! to Fair Value at inception | lessor soll review requlerly estimated UGRU- IF there is reduction in UGRU, fe thal be [considered increase in UGRV from orsinal estimate shell be ignored a 6. | FINANCE LEASES WHERE LESSOR IS A MANUFACTURER OR DEALER [At leote commencement (e+ intial mesrurement). + manufactorer or dealer lester