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AS 19-Is Rent equalization reserve creation for office agreements is obligatory under AS 19 ?

Girish Joshi (Practice) (67 Points)

23 March 2024

Is Rent equalization reserve creation for office agreements is obligatory under AS 19 ?

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5 Replies

Yasaswi Gomes new (Finance ) (4477 Points)
Replied 24 March 2024

Follow provisions and this standard doesn't help reserves. Its all about outdated off balance sheet transactions, lease payments and maturity treatment.

Yasaswi Gomes new (Finance ) (4477 Points)
Replied 24 March 2024

Rent Equalization reserve [Resolved] | Accounts (caclubindia.com)

Yasaswi Gomes new (Finance ) (4477 Points)
Replied 24 March 2024

For example, assume that retrospective application of Ind AS 116 results in the entity recognising a lease liability of Rs 100 and right‑of‑use asset of Rs 85 in respect of a lease as at the beginning of the preceding period, i.e., 1 April 2018. Assume further that the entity’s balance sheet as at 31 March 2018 has a ‘rent equalisation reserve’ of Rs 10 in respect of the lease. In such a case, it would give effect to the transition as of 1 April 2018 as follows.

Right‑of‑use – Dr 85

Rent Equalisation Reserve – Dr 10

Retained Earnings (or other component of equity) – Dr 5

Lease Liability – Cr 100

Girish Joshi (Practice) (67 Points)
Replied 24 March 2024

Thanks.

Ind AS is not applicable to the company . Auditors referring to AS 19 requirements for creation of Lease Equalization reserve. If AS 19 applies is it necessary as per standard to create a Lease Equalization reserve for offices taken on lease for a period of more than one year.