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CA Final · Financial Reporting · Ind AS 116 Leases

Ganga Logistics Ltd holds a right-of-use asset for a warehouse that meets the definition of investment property. Under IFRS 16, a lessee applying the fair value model of IAS 40 must also apply it to such right-of-use assets. How does Ind AS 116 treat this?

Ind AS 116 deleted the IFRS 16 requirement on applying the fair value model to right-of-use assets meeting the definition of investment property. The reason is that Ind AS 40 does not allow the fair value model, so no such treatment exists under Ind AS.

  1. AFair value model is allowed for such right-of-use assets as under IFRS 16
  2. BFair value model is required for all right-of-use assets under Ind AS
  3. CThe IFRS 16 paragraph on the fair value model was deleted because Ind AS 40 does not permit the fair value modelCorrect
  4. DThe fair value model applies only if the lease term exceeds ten years

Explanation

The comparison with IFRS 16 notes that paragraph 34 of IFRS 16 was deleted in Ind AS 116 since Ind AS 40 does not allow the fair value model. Reference to it in paragraph 29 was also removed. Hence the right-of-use asset is not measured at fair value under that route.

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