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

Sundaram Textiles Ltd, a lessee, has recognised a lease liability under Ind AS 116 for its factory premises. The CFO asks how Ind AS 109 applies to this liability. Which statement is correct under the scope paragraph of Ind AS 109?

Lease liabilities recognised by a lessee are largely outside Ind AS 109 because Ind AS 116 governs them, but the lessee must still apply the derecognition requirements of Ind AS 109 to them. Measurement remains under Ind AS 116.

  1. AInd AS 109 does not apply to lease liabilities in any respect
  2. BLease liabilities recognised by a lessee are subject to the derecognition requirements of Ind AS 109Correct
  3. CLease liabilities are fully measured under Ind AS 109 at amortised cost
  4. DLease liabilities are subject only to the impairment requirements of Ind AS 109

Explanation

Ind AS 109 excludes rights and obligations under leases to which Ind AS 116 applies, but para 2.1(b)(ii) retains the derecognition requirements for lease liabilities recognised by a lessee. Saying the standard does not apply at all ignores this exception. Measurement stays under Ind AS 116, and impairment applies to lessor receivables, not lessee liabilities.

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