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

Nair Infra Ltd is the lessor under an operating lease and has recognised lease rentals receivable of Rs 12 lakh from a lessee that has defaulted on payments. Which statement correctly describes how Ind AS 109 applies to this receivable?

The derecognition and impairment requirements of Ind AS 109 apply to the operating lease receivable. Although lease rights and obligations generally fall under Ind AS 116, the Standard expressly brings both finance and operating lease receivables recognised by a lessor back under Ind AS 109 for those two aspects.

  1. AInd AS 109 does not apply at all, since rights under leases are fully outside its scope
  2. BInd AS 109 applies only to finance lease receivables, not operating lease receivables
  3. COnly Ind AS 116 applies, including its own impairment model for lease receivables
  4. DInd AS 109 derecognition and impairment requirements apply to operating lease receivables recognised by the lessorCorrect

Explanation

Rights and obligations under leases are scoped out in favour of Ind AS 116, but finance lease receivables and operating lease receivables recognised by a lessor remain subject to the derecognition and impairment requirements of Ind AS 109. Option 2 is wrong because operating lease receivables are expressly included.

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