Skip to content

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

Neel Enterprises Ltd, a lessor, has a finance lease receivable and an operating lease receivable under Ind AS 116. It also has a lessee subsidiary's lease liability in separate books, and a derivative embedded in a lease. Which statement about Ind AS 109 is correct?

Finance and operating lease receivables recognised by a lessor are subject to the derecognition and impairment requirements of Ind AS 109. Lessee lease liabilities are subject only to derecognition requirements, and derivatives embedded in leases are subject to the embedded derivatives requirements, so the other statements are incorrect.

  1. ALease receivables of a lessor are fully outside Ind AS 109
  2. BA lessee's lease liability is subject to the impairment requirements of Ind AS 109
  3. CEmbedded derivatives in leases are outside Ind AS 109 because leases are fully covered by Ind AS 116
  4. DFinance and operating lease receivables recognised by a lessor are subject to the derecognition and impairment requirements of Ind AS 109Correct

Explanation

Leases under Ind AS 116 are generally scoped out, but exceptions apply: lessor finance and operating lease receivables are subject to derecognition and impairment requirements; lessee lease liabilities to derecognition requirements only; and embedded derivatives in leases to the embedded derivatives requirements. Hence the lessee liability is not subject to impairment, and the other options are wrong.

Did you get it right without looking?

One question tells you little. A timed set on Financial Instruments: Scope and Definitions shows your real accuracy, how long you take and where you lose marks.

Practise Financial Instruments: Scope and DefinitionsFree diagnostic mock

More Financial Instruments: Scope and Definitions questions