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CA Final · Financial Reporting · Financial Instruments: Scope and Definitions

Mahanadi Infra Ltd is a lessee under an Ind AS 116 lease and is a lessor under another arrangement classified as a finance lease, recognising a net investment in the lease. Which statement about Ind AS 109 applying to these items is correct?

Ind AS 109 applies only in part. The lessee's lease liability is subject to its derecognition requirements, and the lessor's lease receivable is subject to its derecognition and impairment requirements. Otherwise lease rights and obligations are governed by Ind AS 116.

  1. AInd AS 109 applies fully to both the lease liability and the finance lease receivable
  2. BInd AS 109 applies to neither, since lease rights and obligations are wholly excluded
  3. CInd AS 109 applies to the lease liability's derecognition and to the receivable's derecognition and impairmentCorrect
  4. DInd AS 109 applies to the lease liability's impairment and to the receivable's initial measurement only

Explanation

Rights and obligations under leases are excluded, but with exceptions. Lessor finance and operating lease receivables are subject to derecognition and impairment requirements, and lessee lease liabilities are subject to the derecognition requirements. Embedded derivatives in leases are also covered. Claiming full application ignores the exclusion; claiming none ignores these exceptions.

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