Skip to content

CA Final · Financial Reporting · Ind AS 116 Leases

Kaveri Infra Ltd holds an investment property under a lease and recognises a right-of-use asset for it. The CFO, who is familiar with IFRS, proposes to measure that right-of-use asset at fair value because the property meets the definition of investment property. Which statement reflects Ind AS 116?

The fair value model cannot be used for such a right-of-use asset. Ind AS 40 does not allow the fair value model, so the IFRS 16 paragraph permitting it for investment property right-of-use assets was deleted in Ind AS 116, and the reference in paragraph 29 was removed.

  1. AFair value model may be applied to the right-of-use asset if the entity uses fair value for all its investment property
  2. BFair value model must be applied to the right-of-use asset because it meets the definition of investment property
  3. CFair value model is not available, because Ind AS 40 does not allow the fair value model and the related paragraph of IFRS 16 has been deleted in Ind AS 116Correct
  4. DFair value model is available only to the extent of the lease liability recognised

Explanation

IFRS 16 permits fair value for right-of-use assets meeting the definition of investment property if the lessee applies the IAS 40 fair value model. Ind AS 40 does not permit the fair value model, so paragraph 34 of IFRS 16 has been deleted in Ind AS 116. The cost-based approach therefore applies; the other options assume an option that does not exist.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 116 Leases shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 116 LeasesFree diagnostic mock

More Ind AS 116 Leases questions