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What is a lease equilibrium reserve?

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 Prateek Agarwal Sr. Executive - Finance & Accounts [ Scorecard : 1724] Posted On 10 May 2012 at 11:57 Hello, Can anyone explain in brief what is a LEASE EQUILIBRIUM RESERVE? Thank You sandeep IFRS Application and IGAAP Consolidation [ Scorecard : 185] Posted On 19 May 2012 at 16:59 As per AS 17 lease accounting, lease rental to be charged to P&L should be on equal basis over the period of the lease. For Example - period of Lease is 3 yrs Year 1 - 10000 p.m. year 2 - 12000 p.m. Year 3 - 14000 p.m. As a general practise, lease rental chargeable to P&L is 10000 p.m for year 1, 12000 p.m. for year 2 and so on. but as per the AS, lease rental should be charged in the following manner - equalised lease rent p.m. = (1000*12+12000*12+14000*12)/3*12 = 12000 p.m over a period of 3 years In this case rent for the 1st year would be 12000*12 = 144000 instead of 10000*12 = 120000. So the diff. of 24000 thousand will be transferred to lease Equalisation reserve a/c. Same practise will be followed for 3 years (i.e. lease period) and at the end of the lease period lease Equalisation reserve a/c will be zero.   Total thanks : 1 times Prateek Agarwal Sr. Executive - Finance & Accounts [ Scorecard : 1724] Posted On 21 May 2012 at 09:51 Thank You Sandeep... That solves my query..

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