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CMA Final · Corporate Financial Reporting · Leases (Ind AS 116)

A lessee holds a right-of-use asset that meets the definition of investment property. In which respect does Ind AS 116 differ from IFRS 16 for this asset?

Ind AS 116 deletes the IFRS 16 option to apply the fair value model to right-of-use assets that are investment property. The reason is that Ind AS 40 does not permit the fair value model, so the fair value alternative is simply not available under Ind AS 116.

  1. AInd AS 116 requires the asset to be measured at fair value through profit or loss
  2. BInd AS 116 does not provide the fair value model option for such an asset, because Ind AS 40 does not allow the fair value modelCorrect
  3. CInd AS 116 requires the asset to be derecognised and the lease expensed on a straight-line basis
  4. DInd AS 116 requires the asset to be revalued every year using the Ind AS 16 revaluation model

Explanation

IFRS 16 allows a lessee that applies the IAS 40 fair value model to apply it also to right-of-use assets that are investment property. Ind AS 40 does not allow the fair value model, so the corresponding paragraph 34 is deleted in Ind AS 116 and the reference to it is removed from paragraph 29. Hence the fair value alternative does not exist under Ind AS 116.

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