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Voices on Reporting-Special session:Impact of new leases standard & other important updates on the life sciences sector

Voices on Reporting-Special session:Impact of new lease

On 30 March 2019, the Ministry of Corporate Affairs (MCA) notified Ind AS 116 which replaces existing standard on leases i.e. Ind AS 17, Leases with effect from accounting periods beginning on or after 1 April 2019. Ind AS 116 is largely converged with International Financial Reporting Standard (IFRS) 16, Leases.

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On 30 March 2019, the Ministry of Corporate Affairs (MCA) notified Ind AS 116 which replaces existing standard on leases i.e. Ind AS 17, Leases with effect from accounting periods beginning on or after 1 April 2019. Ind AS 116 is largely converged with International Financial Reporting Standard (IFRS) 16, Leases.

The new standard brings fundamental change in lease accounting by requiring most operating leases to be recognised on the balance sheet by a lessee. The new accounting guidance is likely to impact a large number of entities operating in diverse sectors particularly on key metrics such as Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), debt/equity ratio, etc.

Continuing with the series of special sessions, this session focussed on the life sciences sector. In this session we discussed the significant areas relating to lease accounting, where current guidance is expected to change due to implementation of new lease standards.

Also we discussed other important updates e.g. the Appendix C, Uncertainty over Income Tax Treatments of Ind AS 12. The new guidance seeks to bring clarity to the accounting for income tax treatments that have yet to be accepted by tax authorities. The appendix is effective for accounting periods beginning on or after 1 April 2019.

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