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CA Final · Financial Reporting · Ind AS 116 Leases

Tejas Pharma Ltd. has a floating-rate lease liability whose payments were linked to an interbank benchmark rate. The benchmark was replaced under interest rate benchmark reform and the contractual cash flows changed as a direct consequence. The CFO asks about the source and effective date of the relief for lessees. Which statement is correct as per Ind AS 116?

The Phase 2 interest rate benchmark reform amendments added paragraphs 104–106 and C20C–C20D to Ind AS 116. They apply to annual reporting periods beginning on or after 1 April 2021, and they were not confined to lessors or to Ind AS 8.

  1. AThe Phase 2 amendments added paragraphs 104–106 and C20C–C20D to Ind AS 116 and apply to annual periods beginning on or after 1 April 2021Correct
  2. BThe Phase 2 amendments added paragraphs 104–106 and C20C–C20D and apply to annual periods beginning on or after 1 April 2023
  3. CThe relief arises from Ind AS 8 only; Ind AS 116 was not amended by Phase 2
  4. DThe Phase 2 amendments apply only to lessors and only to periods beginning on or after 1 April 2021

Explanation

Interest Rate Benchmark Reform Phase 2 amended Ind AS 109, Ind AS 107, Ind AS 104 and Ind AS 116, adding paragraphs 104–106 and C20C–C20D, applicable for annual reporting periods beginning on or after 1 April 2021. The 2023 date and the claim that Ind AS 116 was not amended are therefore wrong. Nothing limits the amendments to lessors.

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