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

Ind AS 116 differs from IFRS 16 on investment property. Sugam Realty Ltd, an Indian company, holds a right-of-use asset that meets the definition of investment property. Which statement is correct?

The fair value option is not available. IFRS 16 lets a lessee apply the fair value model to right-of-use assets that are investment property, but Ind AS 40 does not permit the fair value model, so Ind AS 116 deleted that paragraph.

  1. AIt may measure the right-of-use asset at fair value, as under IFRS 16
  2. BIt must measure the right-of-use asset at fair value through OCI
  3. CThe fair value model option under IFRS 16 for such assets has been deleted, as Ind AS 40 does not allow the fair value modelCorrect
  4. DRight-of-use assets can never meet the definition of investment property under Ind AS

Explanation

The Appendix 1 comparison states that IFRS 16 paragraph 34 lets a lessee apply the fair value model to right-of-use assets meeting the investment property definition. Ind AS 40 does not permit the fair value model, so paragraph 34 was deleted from Ind AS 116. Hence the fair value option is not available, though paragraph numbers are retained.

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