The government has amended certain Indian Accounting Standards (Ind-AS), including the standard relating to leases amid the coronavirus pandemic.
Ind-AS 103, 116 and some other standards have been amended by the Corporate Affairs Ministry.
While Ind-AS 103 pertains to business combinations, Ind-AS 116 relates to principles for recognition, presentation and disclosure of leases.
In the wake of the pandemic, many lessors have extended rent concessions to lessees. However, applying the Ind-AS 116 requirements for changes to lease payments could have posed practical difficulties in the current situation.
Against this backdrop, the ministry has amended the rules whereby entities would get relief from lease modification accounting due to COVID-19 related rent concessions. The amendments can be followed by lessees for annual reporting periods beginning on or after April 1, 2020.
Leading consultancy EY India’s Partner and National Leader (Financial Accounting Advisory Services) Sandip Khetan said the amendment was keenly awaited by Indian companies who were gearing up for their quarterly results.
“Lease modification requires re-computation of lease liability using discount rate on the date of modification. This would have posed significant challenge to company whose volume of leases are very high.
“The amendment to Ind-AS 116 will provide significant relief to such lessees for accounting for rent concessions from lessors specifically arising from the COVID-19 pandemic,” he noted.