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AS 19-Is Rent equalization reserve creation for office agreements is obligatory under AS 19 ?

Girish Joshi (Practice) (67 Points)

23 March 2024

Is Rent equalization reserve creation for office agreements is obligatory under AS 19 ?

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5 Replies

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 Its all about outdated off balance sheet transactions, lease payments and maturity treatment.

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Yasaswi Gomes new (Finance ) (4514 Points)
Replied 24 March 2024

Rent Equalization reserve [Resolved] | Accounts (caclubindia.com)

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.