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  Business   Companies  01 Apr 2019  Govt notifies new accounting standard, lease rule to impact airlines

Govt notifies new accounting standard, lease rule to impact airlines

PTI
Published : Apr 1, 2019, 3:05 pm IST
Updated : Apr 1, 2019, 3:05 pm IST

Ind AS 116 -- to be effective from April 1 -- sets out the principles for recognition, presentation and disclosure of leases.

An official said the standard will help in ensuring more transparency when it comes to recognition of leases by companies and also prevent
 An official said the standard will help in ensuring more transparency when it comes to recognition of leases by companies and also prevent "window dressing" of accounts. (Representational Image)

New Delhi: The government has notified a new accounting standard Ind AS 116 that will bring in more transparency in recognition and disclosures about leases in companies' balance sheets, a senior official said on Sunday.

The Indian Accounting Standard (Ind AS) 116 is expected to have a significant impact on various industries, including aviation where airlines mostly operate planes on lease.

Ind AS 116 -- to be effective from April 1 -- sets out the principles for recognition, presentation and disclosure of leases. It has been notified by the corporate affairs ministry.

An official said the standard will help in ensuring more transparency when it comes to recognition of leases by companies and also prevent "window dressing" of accounts.

"Lessors will need to re-look at their accounting policy of recognising lease income on transition to Ind AS 116 and it may have significant impact on ongoing recognition and measurement of rental income in the financial statements," Sandip Khetan said. Khetan is National Leader and Partner (Financial Accounting Advisory Services) at consultancy EY India.

Leasing of aircraft rather than outright purchase is a common practice in the airlines industry worldwide. With Ind AS 116 in place, the carriers would have to show all such leases on their respective balance sheets.

Ind AS 116 is the equivalent of IFRS (International Financial Reporting Standards) 116.

Tags: indian accounting standard, ind as 116, international financial reporting standards, sandip khetan, ey india
Location: India, Delhi, New Delhi