Skip to content

CMA Final · Corporate Financial Reporting · Leases (Ind AS 116)

Under Ind AS 116 as notified in India, where does a lessee classify the cash payments made for the interest portion of its lease liability in the statement of cash flows?

Under Ind AS 116, cash paid for the interest portion of the lease liability is classified as a financing activity under Ind AS 7. Unlike IFRS, Ind AS 7 does not allow interest paid to be shown as operating, so no choice exists.

  1. AOperating activities, at the entity's option
  2. BFinancing activities, applying Ind AS 7Correct
  3. CInvesting activities, as part of the right-of-use asset acquisition
  4. DEither operating or financing activities, at the entity's option

Explanation

The Appendix 1 comparison with IFRS 16 notes that IAS 7 allows interest paid to be shown as operating or financing, but Ind AS 7 requires interest paid to be treated as financing only. Ind AS 116 was therefore modified so that the interest portion of lease payments is classified as financing activities. The option of operating classification is not available in India.

Did you get it right without looking?

One question tells you little. A timed set on Leases (Ind AS 116) shows your real accuracy, how long you take and where you lose marks.

Practise Leases (Ind AS 116)Free diagnostic mock

More Leases (Ind AS 116) questions