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

Kaveri Realty Ltd. holds a right-of-use asset under a lease and the asset meets the definition of investment property. Under Ind AS 116, which measurement applies to this right-of-use asset after initial recognition?

The right-of-use asset is measured under the cost model. Ind AS 40 does not allow the fair value model, so the IFRS 16 provision permitting fair value for such right-of-use assets was deleted in Ind AS 116. Depreciation and impairment are applied to the asset at cost.

  1. AFair value model, with changes in fair value recognised in profit or loss
  2. BFair value model, with changes recognised in other comprehensive income
  3. CCost model, because Ind AS 40 does not allow the fair value model and the IFRS 16 reference has been deletedCorrect
  4. DNet realisable value, since the asset is held for rental or capital appreciation

Explanation

IFRS 16 allows the fair value model for right-of-use assets that are investment property if the lessee applies it under IAS 40. Ind AS 40 does not permit the fair value model, so that paragraph was deleted in Ind AS 116 and the cost model applies. The fair value options therefore do not follow.

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