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CA Final · Financial Reporting · Ind AS 116 Leases

Which of the following best matches the definition of a lease in Ind AS 116?

A lease is a contract, or part of a contract, that conveys the right to use an asset, called the underlying asset, for a period of time in exchange for consideration. Legal ownership transfer is not needed, which distinguishes it from a sale or forward purchase.

  1. AA contract that transfers legal ownership of an asset to the buyer after payment of instalments
  2. BA contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for considerationCorrect
  3. CA contract under which services are provided using assets owned by the provider, with no right of use
  4. DAn agreement to purchase an asset at a future date at a fixed price

Explanation

Appendix A defines a lease as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. Transfer of legal ownership is not required. The other options describe a sale, a pure service, or a forward purchase.

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