Presentation under AS 19

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Abhishek (Querist)
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04 September 2009 This is regarding the presentation & disclosure of information under AS 19.
Please some one let know how the following transaction will be shown under AS 19 for year 2009-10 & 2010-11 books :

1. A company has taken a machine on lease rental for 3 years starting from 1st july 09 to 30 june 2012 for monthly lease rental of Rs. 10000/-, which after 3 years will become company property.

2. Company has took on rent a premise for 11 months lease from 1st jan 2010 for monthly rent of Rs. 20000/-..

3. A company has taken a car on loan for 6 years starting from 1st Oct 2010 to 30 Sept 2016 for monthly emi of Rs. 8000/-, which after 6 years will become company property.

Abhishek

Abhishek (Querist)
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12 November 2009 This is regarding the presentation & disclosure of information under AS 19.
Please some one let know how the following transaction will be shown under AS 19 for year 2009-10 & 2010-11 books :

1. A company has taken a machine on lease rental for 3 years starting from 1st july 09 to 30 june 2012 for monthly lease rental of Rs. 10000/-, which after 3 years will become company property.

2. Company has took on rent a premise for 11 months lease from 1st jan 2010 for monthly rent of Rs. 20000/-..

3. A company has taken a car on loan for 6 years starting from 1st Oct 2010 to 30 Sept 2016 for monthly emi of Rs. 8000/-, which after 6 years will become company property.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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10 August 2024 ### **Presentation and Disclosure under AS 19 - Leases**

AS 19 "Leases" prescribes the accounting treatment for leases and the disclosure requirements. The transactions you've mentioned involve different types of leases and loans, and their presentation and disclosure under AS 19 will vary based on their classification as operating leases or finance leases. Here’s how each transaction should be presented and disclosed:

#### **1. Machine Taken on Lease (Operating Lease)**

**Transaction Details:**
- **Lease Term:** 1st July 2009 to 30th June 2012
- **Monthly Lease Rental:** Rs. 10,000
- **Lease Type:** Operating Lease (since ownership is transferred at the end of the lease term)

**Presentation and Disclosure:**
- **In the Financial Statements:**
- **Lease Rentals:** Lease rentals paid should be charged to the Profit and Loss Account on a straight-line basis or another systematic basis over the lease term.
- **Asset Classification:** Since the lease is classified as an operating lease (because it will become company property at the end), the leased machine will not be capitalized on the balance sheet. Instead, the lease rental payments are treated as rental expense.

- **Disclosure Requirements:**
- **Future Lease Payments:** Disclose the total future minimum lease payments under non-cancellable operating leases in the notes to the financial statements.
- **Lease Payment Schedule:** Provide a breakdown of the lease payments due within the next one year and thereafter.

**Example Disclosure:**

```
**Operating Lease Rentals:**
- Minimum Lease Payments recognized as an expense during the year ended March 31, 2010: Rs. 1,20,000
- Future minimum lease payments under non-cancellable leases:
- Not later than one year: Rs. 1,20,000
- Later than one year but not later than five years: Rs. 2,40,000
```

#### **2. Premises Taken on Rent (Operating Lease)**

**Transaction Details:**
- **Lease Term:** 1st January 2010 to 31st December 2010
- **Monthly Rent:** Rs. 20,000

**Presentation and Disclosure:**
- **In the Financial Statements:**
- **Rent Expense:** Rental payments should be recognized as an expense in the Profit and Loss Account on a straight-line basis over the lease term.

- **Disclosure Requirements:**
- **Lease Payment Schedule:** Since this is a short-term lease, you should disclose the total amount of rent expense for the year. There is no requirement for detailed future minimum lease payments disclosure for leases less than one year.

**Example Disclosure:**

```
**Rent Expense:**
- Total Rent Expense for the year ended March 31, 2010: Rs. 2,40,000
```

#### **3. Car Taken on Loan (Finance Lease)**

**Transaction Details:**
- **Loan Term:** 1st October 2010 to 30th September 2016
- **Monthly EMI:** Rs. 8,000
- **Loan Type:** Finance Lease (since the car will become company property at the end of the term)

**Presentation and Disclosure:**
- **In the Financial Statements:**
- **Asset Capitalization:** The car should be recognized as an asset on the balance sheet. It should be capitalized at the inception of the lease.
- **Liability Recognition:** The present value of future lease payments should be recognized as a liability (obligation under finance lease) on the balance sheet.
- **Depreciation:** The car should be depreciated over the lease term or its useful life, whichever is shorter.

- **Disclosure Requirements:**
- **Minimum Lease Payments:** Disclose the total future minimum lease payments and their classification into principal and interest components.
- **Car Depreciation:** Provide information on the depreciation method and period used for the leased asset.

**Example Disclosure:**

```
**Finance Lease:**
- Gross carrying amount of leased assets as of March 31, 2011: Rs. 4,80,000
- Accumulated depreciation as of March 31, 2011: Rs. 80,000
- Net carrying amount as of March 31, 2011: Rs. 4,00,000

**Future Minimum Lease Payments:**
- Not later than one year: Rs. 96,000
- Later than one year but not later than five years: Rs. 3,84,000
```

### **Summary**

- **Operating Lease (Machine and Premises):** Recognize lease payments as an expense in the Profit and Loss Account and disclose future minimum lease payments.
- **Finance Lease (Car Loan):** Capitalize the leased asset and recognize the liability. Depreciate the asset and disclose future minimum lease payments, including principal and interest components.

By following these guidelines, you can ensure that your financial statements comply with AS 19 and provide accurate and clear information regarding your lease transactions.

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