The new standard on leases, Ind AS 116, Leases is now applicable for Ind AS companies from the accounting period beginning on or after 1 April 2019. For lessees the standard is expected to bring operating leases on-balance sheet as if the entity has borrowed funds to purchase an interest in the leased asset. The standard will impact the statement of profit and loss of the lessees as well. Currently, operating lease expenses are charged to the statement of profit and loss on a straight-line basis over the life of a lease. Companies will now recognise a front-loaded pattern of expense for most leases even when they pay constant annual rentals. Therefore, in this edition of Accounting and Auditing Update (AAU), we have included an analysis of the Nifty 50 listed companies and our observations with respect to the disclosures provided by them for Ind AS 116 in the financial results for the quarter ended 30 June 2019. We have also analysed the disclosures provided in the annual reports by the Nifty 50 companies for the year ended 31 March 2019 with respect to operating lease accounting under erstwhile Ind AS 17, Leases.
Implementation of Ind AS 116 is also expected to pose many practical challenges for companies. Our article on the topic aims to discuss four key implementation issues of the standard with the help of practical examples.
In order to address the ambiguity relating to presentation of income tax consequences of payments on financial instruments classified as equity, the International Accounting Standards Board (IASB) amended the International Accounting Standard (IAS) 12, Income Taxes. Consequently, the Ministry of Corporate Affairs (MCA) also amended Ind AS 12, Income Taxes and clarifies the manner of presentation of dividend and consequent dividend distribution taxes in the financial statements. Recently, the Institute of Chartered Accountants of India (ICAI) has also issued a Frequently Asked Question (FAQ) in this regard. Our article provides an overview of the amendment in Ind AS 12 and the clarification provided by ICAI.
As is the case each month, we have also included a regular round-up of some recent regulatory updates.