AS-19

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 February 2011 Hi Experts,
One of our client taken lease for 10 years and the life of the asset is 15 yrs,and they recognized the lease asset as financial lease(because for subtanial period asset has taken on lease) and calcluated dep accordingly .However in the lease agreement it is mentioned that lessee has right to return the asset at any point of time,Now after 3 years our client want to return that lease asset because better machine available in the market than the lease asset.

My query is
1)Now,how to deal with the above situation?2)wat abt the dep which our client provided previously?
3)Suppose instead of returing the lease assset if our client retain the asset for 2 more years in such case it becomes operating lease in such case wat i should do for the entries which they have given based on finacial lease?and wat will be the prosecpective entries?

And according to which para of As-19 we can gve above treatment

Thrissurkkaran Ishtan

Thrissurkkaran Ishtan (Expert)
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01 March 2011 My view is that since it has been recognised in the books as financial lease, the return will be considered as a "sale of asset". This also solved the question 2.

If the client retains the asset, then the existing financial lease continue.