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Land lease-IND AS 116


Ghuru Ramachandran   03 July 2020

Ghuru Ramachandran

 2 points

| My Other Post

Our factory is located at Andhra pradesh on a land that is taken on 99 years lease. The lease contains an upfront premium and also a rental charge to be paid on monthly basis for the entire duration of 99 years (rent- INR 40 lac/annum) The initial non-cancellable period is for 33 years and the agreement provides for further 2 extensions of 33 years in the option of lessee (our company) and the possibility of extension is certain at this point as well. Does this transaction gets covered under IND AS 116? If yes, how to go about arriving at the Lease liability and ROU as per IND AS 116?

 

Ritik Jain

Ritik Jain   04 July 2020

Ritik Jain

 4 points

View Profile | My Other Post
Yes, Land lease for 99 years is covered under IND AS 116.
lease liability can be arrived at by considering an appropriate discount rate. The monthly can be discounted using the discount rate and the total of all discounted value shall be the amount of lease liability and ROU asset

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