Lease rentals
This query is : Resolved
16 November 2015
Lease -
Operating Lease A Shopping Mall is taken on lease and it is sub leased to various tenants. IAS 17/ AS 19 is applicable for the same while recognizing Expense from the point of view of lessee and Income from the point of view of Lessor.
AS/IAS says Lease income/Expense from operating leases should be recognised in the statement of profit and loss on a straight line basis over the lease term, unless another systematic basis is more representative of the time pattern in which benefit derived from the use of the leased asset is diminished.
Can any one interpret above lines with example.
If possible share the impact of the same in Financial statement with example.Also any excel file to work on the same.
Viz: For Example
1.Lease agreement is for a period of 5 Years and each year rent is changing progressively.
2. What happens if tenant cancels agreement in between. what will be the impact on income which is already recognized on Straight line basis.
3. How the impact need to be taken if the company is only considering one year rentals as revenue and recognizing only that portion as revenue.
Thanks & Regards
Operating Lease A Shopping Mall is taken on lease and it is sub leased to various tenants. IAS 17/ AS 19 is applicable for the same while recognizing Expense from the point of view of lessee and Income from the point of view of Lessor.
AS/IAS says Lease income/Expense from operating leases should be recognised in the statement of profit and loss on a straight line basis over the lease term, unless another systematic basis is more representative of the time pattern in which benefit derived from the use of the leased asset is diminished.
Can any one interpret above lines with example.
If possible share the impact of the same in Financial statement with example.Also any excel file to work on the same.
Viz: For Example
1.Lease agreement is for a period of 5 Years and each year rent is changing progressively.
2. What happens if tenant cancels agreement in between. what will be the impact on income which is already recognized on Straight line basis.
3. How the impact need to be taken if the company is only considering one year rentals as revenue and recognizing only that portion as revenue.
Thanks & Regards
16 November 2015
try to sort it out one by one, then you may not land into confusion.
01. lease rental is payable monthly. Lessor will acordingly account it for. This is nothing but straight line basis.
02. as per matching principple, the expenses congruent to income shall be accounted for.
now what is your difficulty? please ask one by one...
01. lease rental is payable monthly. Lessor will acordingly account it for. This is nothing but straight line basis.
02. as per matching principple, the expenses congruent to income shall be accounted for.
now what is your difficulty? please ask one by one...
23 November 2015
Thanks..Let take it one by one to avoid confusion.
01. Lease rent is payable monthly.
Lease period is 5 Years.
Rent on Yearly basis are Rs 100000 for two years/Rs 200000 for next two years/ Rs 400000 in fifth year.
PDC cheques are issued based on yearly amounts . ie 100000 for first year.
How the case will be accounted based on IAS 17 ? where it can be interpreted that total lease amount i.e Rs 10, 00, 000 should be treated as one Contract and revenue need to be recognized.
01. Lease rent is payable monthly.
Lease period is 5 Years.
Rent on Yearly basis are Rs 100000 for two years/Rs 200000 for next two years/ Rs 400000 in fifth year.
PDC cheques are issued based on yearly amounts . ie 100000 for first year.
How the case will be accounted based on IAS 17 ? where it can be interpreted that total lease amount i.e Rs 10, 00, 000 should be treated as one Contract and revenue need to be recognized.
23 November 2015
We are continuing with your ORIGINAL query, aren't we?
Shopping Mall is taken on Lease.
Deposit paid, if any
debit lease deposit for shopping mall
credit bank
lease rent paid every month
debit lease rental for shopping mall
credit bank
Now for the sub lease.
Deposit received.
debit bank account
credit deposit for sub lease
lease rent received.
debit bank
credit sub lease rentals.
Needless to add : both are subject to service tax as well as income tax TDS, as per the existing norms.
Can you now please, ask your difficulty in relation to AS?
The above entries are as per AS.
Shopping Mall is taken on Lease.
Deposit paid, if any
debit lease deposit for shopping mall
credit bank
lease rent paid every month
debit lease rental for shopping mall
credit bank
Now for the sub lease.
Deposit received.
debit bank account
credit deposit for sub lease
lease rent received.
debit bank
credit sub lease rentals.
Needless to add : both are subject to service tax as well as income tax TDS, as per the existing norms.
Can you now please, ask your difficulty in relation to AS?
The above entries are as per AS.
23 November 2015
Dear Amol
I already know the entries.
My querry is how to account for revenue in the first year.
Is it
Case 1. Total Lease Amount of 10, 00, 000 which will be recognized as 10, 00, 000/5 Year on a straight line basis by treating it as one lease agreement.
i.e Rs 200, 000 per Year as per AS 19
or,
Case 2.
Cheque paid every year i.e for the first year we issued a cheque of Rs 100, 000.
How much Rental need to be recognized in a year
Rs 200, 000 or Rs 100, 000
I already know the entries.
My querry is how to account for revenue in the first year.
Is it
Case 1. Total Lease Amount of 10, 00, 000 which will be recognized as 10, 00, 000/5 Year on a straight line basis by treating it as one lease agreement.
i.e Rs 200, 000 per Year as per AS 19
or,
Case 2.
Cheque paid every year i.e for the first year we issued a cheque of Rs 100, 000.
How much Rental need to be recognized in a year
Rs 200, 000 or Rs 100, 000
29 November 2015
Why are you changing your query every now and then?
As said by you in your initial query "Lease agreement is for 5 years and lease rent is changing progressively"
The ACTUAL revenue received shall be recongnised. e.g. 100,000 for the first year and so on so forth. Why do you think that AS 19 will over rule the actual revenue?
As said by you in your initial query "Lease agreement is for 5 years and lease rent is changing progressively"
The ACTUAL revenue received shall be recongnised. e.g. 100,000 for the first year and so on so forth. Why do you think that AS 19 will over rule the actual revenue?
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