Girish Joshi (Practice) (67 Points)
23 March 2024Is Rent equalization reserve creation for office agreements is obligatory under AS 19 ?
Yasaswi Gomes new
(Finance )
(4514 Points)
Replied 24 March 2024
Follow provisions and this standard doesn't help reserves. Its all about outdated off balance sheet transactions, lease payments and maturity treatment.
Yasaswi Gomes new
(Finance )
(4514 Points)
Replied 24 March 2024
Yasaswi Gomes new
(Finance )
(4514 Points)
Replied 24 March 2024
For example, assume that retrospective application of Ind AS 116 results in the entity recognising a lease liability of Rs 100 and right‑of‑use asset of Rs 85 in respect of a lease as at the beginning of the preceding period, i.e., 1 April 2018. Assume further that the entity’s balance sheet as at 31 March 2018 has a ‘rent equalisation reserve’ of Rs 10 in respect of the lease. In such a case, it would give effect to the transition as of 1 April 2018 as follows.
Right‑of‑use – Dr 85
Rent Equalisation Reserve – Dr 10
Retained Earnings (or other component of equity) – Dr 5
Lease Liability – Cr 100
Girish Joshi
(Practice)
(67 Points)
Replied 24 March 2024
Thanks.
Ind AS is not applicable to the company . Auditors referring to AS 19 requirements for creation of Lease Equalization reserve. If AS 19 applies is it necessary as per standard to create a Lease Equalization reserve for offices taken on lease for a period of more than one year.
Yasaswi Gomes new
(Finance )
(4514 Points)
Replied 26 March 2024
It is deductible as per supreme court order in 2018. More info available in PWC papers
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