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

Raghav Infra Ltd leases machinery to a customer under a finance lease and recognises a net investment in the lease. Which statement correctly describes how Ind AS 109 applies to this lessor receivable?

The lessor's net investment in a finance lease is subject to the derecognition and impairment requirements of Ind AS 109. Although lease rights and obligations are generally excluded in favour of Ind AS 116, the standard expressly retains these two requirements for finance and operating lease receivables recognised by a lessor.

  1. AIt is wholly outside Ind AS 109 because it arises under a lease
  2. BIt is subject to the derecognition and impairment requirements of Ind AS 109Correct
  3. CIt is subject only to the recognition requirements of Ind AS 109, not impairment
  4. DIt is subject to Ind AS 109 only if the lease contains an equity component

Explanation

Leases under Ind AS 116 are excluded from Ind AS 109, but finance lease receivables and operating lease receivables recognised by a lessor remain subject to its derecognition and impairment requirements. Option 1 ignores this exception.

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