Ind AS 116
Active
Leases
Requires lessees to recognise most leases on-balance-sheet via right-of-use assets and lease liabilities, substantially converged with IFRS 16, with an India-specific COVID-19 rent concession practical expedient.
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Conceptual Framework Linkage
Identical single-model philosophy to IFRS 16
Ind AS 116 applies the IDENTICAL principle as IFRS 16 – nearly ALL leases are brought ON-BALANCE-SHEET for lessees via a right-of-use asset and lease liability, eliminating the old operating vs finance lease distinction for lessees (Ind AS 17's dual model).
HOW IND AS 116 MAPS TO THE FRAMEWORK
Faithful representation – reflecting the genuine economic obligation of committed lease payments – identical to IFRS 16 Comparability – eliminating the prior ability to structure leases as "off-balance-sheet" operating leases – identical to IFRS 16 India's own COVID-19 practical expedient – the MCA introduced an Ind AS 116 amendment permitting a practical expedient for COVID-19-related rent concessions, closely mirroring IFRS 16's own equivalent amendment in SUBSTANCE, though introduced through India's own separate notification process and timeline
Ind AS 116 REPLACED the earlier Ind AS 17, identical in effect to how IFRS 16 replaced IAS 17 globally – a major transition requiring most Indian lessees to bring OPERATING leases onto the balance sheet for the first time.
The core mechanics – identical to IFRS 16
Right-of-use asset = Initial lease liability + prepayments + initial direct costs − incentives received
IDENTICAL initial measurement formula to IFRS 16.
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Scope & Applicability
What Ind AS 116 covers
Ind AS 116 applies to ALL leases except leases of intangible assets, biological assets, service concession arrangements, licences of IP, and rights under Ind AS 115-scoped arrangements – IDENTICAL scope to IFRS 16.
Key definitions you must know
Right-of-use asset
IDENTICAL definition to IFRS 16 – an asset representing a lessee's right to use an underlying asset over the lease term.
MCA
Ministry of Corporate Affairs – the Indian government body that notifies Ind AS amendments, including the COVID-19 rent concession expedient.
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Identifying a Lease
Identical control-based test to IFRS 16
A contract is/contains a lease if it conveys the RIGHT TO CONTROL the use of an identified asset for a period in exchange for consideration – IDENTICAL to IFRS 16, requiring both the right to obtain substantially all economic benefits AND the right to direct use.
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The Single Lessee Model – Right-of-Use Asset & Lease Liability
Identical recognition, measurement, and subsequent accounting to IFRS 16
Example 1: An Indian retailer's store lease
An Indian retail company enters a 5-year store lease with annual payments of ₹24,00,000, and an incremental borrowing rate of 10%.
The lease liability is recognised at the PRESENT VALUE of the 5 annual payments discounted at 10% (approximately ₹90,98,000), with an EQUAL right-of-use asset recognised initially – the asset is then depreciated on a straight-line basis, while the liability accretes interest and is reduced by payments – an IDENTICAL mechanism to how IFRS 16 would account for the same lease globally.
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Recognition Exemptions
Identical two exemptions to IFRS 16
Short-term leases (12 months or less, no purchase option) and low-value asset leases – IDENTICAL exemptions to IFRS 16, permitting straight-line expense recognition instead of balance sheet recognition.
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Lessor Accounting
Identical dual model to IFRS 16
Lessors continue to classify leases as OPERATING or FINANCE, largely UNCHANGED from the old Ind AS 17 lessor model – IDENTICAL to IFRS 16's own retained lessor approach.
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The COVID-19 Rent Concession Practical Expedient – Indian Timeline
A genuinely notable, though narrow, Indian-specific procedural difference
Both the IASB (for IFRS 16) and India's MCA (for Ind AS 116) introduced a practical expedient allowing lessees to elect NOT to assess whether a COVID-19-related rent concession is a lease modification, instead accounting for it directly in profit or loss. While CLOSELY MIRRORING each other in substance, the Indian amendment was notified through India's own separate rule-making process (Companies (Indian Accounting Standards) Amendment Rules) with its own specific effective date and scope wording, rather than being automatically incorporated the moment the IASB issued its equivalent amendment.
Example 2: Applying the rent concession expedient
An Indian retail tenant receives a ₹3,00,000 rent waiver from its landlord as a direct consequence of COVID-19, with no other substantive contractual terms changed.
Under the Ind AS 116 practical expedient, the tenant may elect to recognise the ₹3,00,000 as a REDUCTION of lease expense/liability directly in profit or loss WITHOUT reassessing whether this constitutes a lease modification – an IDENTICAL practical outcome to how IFRS 16's own equivalent expedient would apply, though arising from India's own separately notified amendment rather than automatic global incorporation.
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Sale and Leaseback
Identical to IFRS 16
Sale and leaseback transactions are assessed against Ind AS 115's control transfer criteria to determine whether a genuine sale has occurred – IDENTICAL to IFRS 16's own cross-reference approach.
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Disclosure Requirements
Identical disclosure requirements to IFRS 16
Right-of-use asset depreciation, interest expense on lease liabilities Short-term/low-value lease expense Maturity analysis of lease liabilities
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Critical Judgments & Estimates
Where management judgement matters most
SIGNIFICANT JUDGEMENTS
Determining the lease term (including renewal/termination option assessments) Whether a rent concession genuinely qualifies for the COVID-19 practical expedient
SIGNIFICANT ESTIMATES
Incremental borrowing rate, particularly for Indian entities without an easily observable rate
Determining an appropriate incremental borrowing rate can be genuinely challenging for Indian unlisted/smaller entities without direct market borrowing rate references, often requiring build-up approaches referencing risk-free rates plus credit spread adjustments.
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Ind AS 116 vs IFRS 16 – Full Comparison
Comprehensive comparison table
FeatureIFRS 16Ind AS 116
Single lessee on-balance-sheet modelStandard modelIDENTICAL – no substantive divergence
Recognition exemptionsShort-term, low-valueIDENTICAL
COVID-19 rent concession expedientIASB amendment, global effective dateMCA's own SEPARATELY notified amendment, closely mirroring IFRS 16's substance but on India's own notification timeline
Predecessor standard replacedIAS 17Ind AS 17
Ind AS 116 is essentially IDENTICAL to IFRS 16 in substance – the meaningful Indian divergence is a narrow, procedural difference in how the COVID-19 rent concession practical expedient was notified, not any accounting divergence.
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Statement Mapping
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
Right-of-use asset depreciationP&L Balance SheetIdentical to IFRS 16
Lease liability interest accretionP&L Balance SheetIdentical to IFRS 16
COVID-19 rent concession (elected)P&LDirect reduction, no modification reassessment
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Related Standards
Cross-reference map
StandardConnection
IFRS 16The global counterpart standard, near-identically converged
Ind AS 17 (withdrawn)Predecessor standard replaced by Ind AS 116
Ind AS 115Supplies the control transfer test for sale and leaseback
Quick-reference glossary
Incremental borrowing rate
The rate a lessee would have to pay to borrow funds to obtain an asset of similar value in a similar economic environment – identical concept to IFRS 16.
Companies (Indian Accounting Standards) Amendment Rules
The MCA's mechanism for notifying Ind AS amendments, including the COVID-19 rent concession expedient.
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Glossary
Right-of-use asset
An asset representing a lessee's right to use an underlying asset over the lease term – IDENTICAL definition to IFRS 16.
Lease liability
The lessee's obligation to make lease payments, measured at the present value of lease payments – IDENTICAL definition to IFRS 16.
Incremental borrowing rate
The rate a lessee would have to pay to borrow funds to obtain an asset of similar value in a similar economic environment – identical concept to IFRS 16.
COVID-19 rent concession expedient
A practical expedient permitting lessees to elect not to assess whether a COVID-19-related rent concession is a lease modification, instead accounting for it directly in profit or loss.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows