Accounting For AS-19 in consolidated Balance sheet

AS 767 views 1 replies

How will the holding co. will account in its consolidated balance sheet???

if an asset is given on lease by holding co. to its subsidary and the lease is a financial lease?????

Replies (1)

Please see below example....

you will get some idea on accounting of Finance lease in Holding company

 

An enterprise (the lessee) acquires a machinery on lease from a

leasing company (the lessor) on January 1, 20X0. The lease term

covers the entire economic life of the machinery, i.e., 3 years. The

fair value of the machinery on January 1, 20X0 is Rs.2,35,500. The

lease agreement requires the lessee to pay an amount of Rs.1,00,000

per year beginning December 31, 20X0. The lessee has guaranteed

a residual value of Rs.17,000 on December 31, 20X2 to the lessor.

The lessor, however, estimates that the machinery would have a

salvage value of only Rs.3,500 on December 31, 20X2.

The interest rate implicit in the lease is 16 per cent (approx.). This

is calculated using the following formula:

ALR ALR ALR RV

Fair value = + + + +

(1 + r)1 (1 + r)2 (1 + r)n (1 + r)n

where ALR is annual lease rental,

RV is residual value (both guaranteed and

unguaranteed),

n is the lease term,

r is interest rate implicit in the lease.

The present value of minimum lease payments from the stand point

of the lessee is Rs.2,35,500.

The lessee would record the machinery as an asset at Rs. 2,35,500

with a corresponding liability representing the present value of lease

payments over the lease term (including the guaranteed residual

value).


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