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AS-19-Leases

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Published in: Accountancy
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This topic is so much significant in the professional level of CA,ICWA. The students can go through with my attached notes to understand the Lease types and assists them to understand the concept of valuation of the leasehold assets. Enjoy the topic and let me know if any doubt you have.

Mahesh S / Chennai

6 years of teaching experience

Qualification: B.Com (KU - 2009)

Teaches: CA - CPT, CA - IPCC, CS - Executive, CS Professional, Accountancy, Computer Science, Hindi, Mathematics, School Level Computer, Costing, Direct Tax, Statistics

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  1. Objective Recognising the lease transaction in a Standardised way. Oper.lease Just a rent exp.
  2. Qn.170 Page no:-1.34 Pblm 53 Page n0396 TRV Step-I P.V of MLP MLP=LR+GRV Add:-GRV MLP YR 1 2 3 23,500.00 300,000.00 300,000.00 300,000.00 900,000.00 22,000.00 922,000.00 GRV PVF@150/0 0.8696 0.756 0.657 0.657 (A) Ans:-Asset Value in the books of Lessee an no:-8 Page no:-1.18May 2006 MKTP-I Nov-2015 page no:-2 i)Caln of Ann.Lease payment Cost of the Eq. Ung.Res.Value Pv of Res.Val (use 3rd year PVF) F.V to be recoverd from the lease- payment (150000-15020) Annual lease payment ii) Unearned Fl LP for 3 yrs Add:-Total Res.Value Less:-PV of Invsts=Pv of (RV+F.V) (134980+15020) UEFI Qn 5(b) Page 1.11 Cost of the Eq./FV Ung.Res.Value Pv of Un. Res.Val (use 3rd year PVF) F.V to be recoverd from the lease- payment (300000-30052) Pv of MLP FMV at inception (given) Reverse Work Calculation Step-I:-PV of Unguaranteed Res 150,000.00 Step 2:-F.V to be recovered fron 20,000.00 p 3:- Annual lease payment 15,026.00 134,980.00 (F.V/Ann.Factor) 54,275.00 162,825.00 MLP=LR+GRV (Exc.cost of tax/service re-imbur 20,000.00 (Contigent rents) 182,825.00 (150,000.00) RV-GRV) GI=MLP+UGRV 32,825.00 UFI=GI-NI (in lakhs) Step-I:-PV of Unguaranteed Res 300,000.00 Step 2:-F.V to be recovered fron 40,000.00 Step 3:- Annual lease payment= 30,052.00 269,948.00
  3. Annual lease payment ii) Unearned Fl LP for 3 yrs Add:-Total Res.Value/Un.Res.Value Less:-PV of Invsts/COA UEFI Qn 7(b) Page no:-33 Add:-GRV 108,550.00 (F.V/Ann.Factor) 325,650.00 (excluding applying the PVF) 40,000.00 LP 365,650.00 (300,000.00) 65,650.00 Its assumed that FV of the leased asset is equal to the PV of MLP. Cost of the Eq.-PV of Invst/MLP Ung.Res.Value Pv of Un. Res.Val (use 3rd year PVF) F.V to be recoverd from the lease- payment (50000T-37565) Annual lease payment ii) Unearned Fl LP for 3 yrs Add:-Total Res.Value/Un.Res.Value Less:-PV of Invsts UEFI Qn-67 Page no:-52 step 1:- PV of MLP YR MLP Add :-UGRV Asset Value as per AS-19 (Beg. Of the Year) Asset a/c Dr 500,000.00 PVF for 3rd year 50,000.00 An.Factor for 3 years 37,565.00 462,435.00 PV of MLP covers majority of FM 185,956.00 557,868.00 50,000.00 607,868.00 (500,000.00) 107,868.00 1 2 3 4 5 IRR @150/0 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 500,000.00 20,000.00 520,000.00 20,000.00 540,000.00 184,952.00 JE in the books of SB Ltd (Lessee) 0.8696 0.756 0.657 0.5718 0.4972 0.4972 0.4972 Dr PV (MLP) or FMV Cr 345,104.00
  4. To Lessor End of the Year Fin.Char a/c Dr To Lessor Lessor a/c Dr To Bank Depn a/c Dr To Machinery a/c Dr To Dep To Fin.Charges 345,104.00 51765.6 51765.6 100,000.00 100,000.00 34,510.40 34,510.40 34,510.40 51765.6
  5. Qn.3-Page no:-413 Basic Data Analysis Def. of profit for- Each year (in the ratio of Depn) Santa Ltd (Vendor) Sale Val.Equipment= WDV on the date= 51,446.00 Pft on sale Leased Back to seller Lease period = Eco.Life= Lease period covers majority of t Nature of Lease As per AS-19, profit/loss on sale of leased asset has to be deferred for leased period in the ra Year Depn for each yr Def. of prof/Loss(Cr-lncome) Yr 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 61,446.00 61,446.00 61,446.00 61,446.00 61,446.00 61,446.00 61,446.00 61,446.00 61,446.00 61,446.00 Liability 614,460.00 38,554.00 575,906.00 42,409.00 533,497.00 42,409.00 491,088.00 50,891.00 440,197.00 50,891.00 389,306.00 61,069.00 328,237.00 61,069.00 51,446.00 51,446.00 51,446.00 51,446.00 51,446.00 51,446.00 51,446.00 51,446.00 51,446.00 51,446.00 Interest@10% 61,446.00 57,591.00 53,350.00 49,109.00 44,020.00 38,931.00 32,824.00
  6. 8 9 10 GRV 267,168.oo 73,283.oo 193,885.oo 80,611.00 113,274.oo 80,611.00 32,663.oo 26,717.oo 19,389.oo 11,327.oo
  7. AS-19 Leases/lnd AS 17 Types of Leases Fin.Lease Its financing an Asset. Lessor Rental Installments for specific period as per contract Physical possession+Substantial Risk/Req Relevant for lessor
  8. 1,500.00 PV of Amt ;.Value n the lease payment sed by lessee) FV/COA 1st YR ;.Value n the lease payment FV/AF 22,000.00 UGRV (TRV-GRV) 260,880.00 226,800.00 197,100.00 14,454.00 699,234.00 (P.v of MLP) Lower of (PV of MLP/FMV) 699,234.00 700,000.00 PVF PV of MLP 699,234.00 Value of Machinery in the Yr-I Yr-2 1 0.9091 2 0.8264 (COA-PV of URV) (F.V/Ann.Factor for the life of Asset) 2nd YR (B) Ans:-Yearl) Yr 1 2 3 App.Res Value Represents Res.Value Note:- 3rd YR Ann.Factor 0.7513 2.4868
  9. PV of Amt WIL 108,550.00 0.7513 2.4868 92.00% 86,960.00 75,600.00 65,700.00 57,180.00 49,720.00 9,944.00 345,104.00 9,944.00 355,048.00 345,104.00 400,000.00 UGRV Exp.RV GRV UGRV PV of MLP 345,104.00 40,000.00 20,000.00 20,000.00 Statement shc YR 1 2 3
  10. 4 5 Vendor Finance Lease Profit or Loss on sale should be amortise Lease period in the ratio of Depn chargec each year SP=FMV 100% a/c
  11. 614,460.00 100,000.00 514,460.00 10 years 10 years :he Eco.Life Finance Lease Itio of depreciation calculated for each year. Interest Charges(See Table) Beside Banta Ltd (Buyer) Value of Asset LP for each ye Value of Asset Depn for each 61,446.00 57,591.00 53,350.00 49,109.00 44,020.00 38,931.00 32,824.00 26,717.00 19,389.00 11,327.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 (Depn-Def.P&L a/c+lnterest Charges) Net effect on the P&L a/c 71,446.00 67,591.00 63,350.00 59,109.00 54,020.00 48,931.00 42,824.00 36,717.00 29,389.00 21,327.00 Principal (LP-lnterest) 38,554.00 42,409.00 46,650.00 50,891.00 55,980.00 61,069.00 67,176.00
  12. 100,000.00 100,000.00 100,000.00 73,283.00 80,611.00 88,673.00
  13. Lessee lards. MLP=LR+GRV (Owner as per AS-19) (Any one enough to satisfy as F.L) Conditions for F.L Assets has been tferred after the Leas. Period. Lessee is given an option to buy the asset @ discount. Leas.Period covers the major eco.life of asset P.V(MLP) covers the subst.FMV(Asset) Specialised asset. (Exc.cost of tax/service re-imbursed by lessee) (Contigent rents) RV-GRV) GI=MLP+UGRV UFI=GI-NI Gl=Guaramteed Income NI=Net Income UFl=Unearned Fin.lncome
  14. (B) Ans:-Yearly finance charges to be incurred by lessee Yr Res.Value Note:- books of Lessee Yr-3 Liability for each year Int@15% (Yea Rental 1 2 3 699,234.00 195,114.90 504,119.10 224,381.40 279,737.70 258,039.34 21,698.36 104,885.10 75,617.87 41,960.66 300,000.00 300,000.00 300,000.00 Principal(Rent 195,114.90 224,382.13 258,039.34 The difference between this figure & GRV is due to approximation in computing 3 ROI 0.7513 finance charges to be incurred by lessee 2.4868 (annuity factor) Liability for each year Int@100/0 150,000.00 (39,275.00) 110,725.00 (43,206.50) 67,518.50 (47,527.15) 19,991.35 15,000.00 11,072.50 6,751.85 32,824.35 Rental 54,275.00 54,279.00 54,279.00 Principal(Rental-lnterest) 39,275.00 43,206.50 47,527.15 The difference between this figure & GRV is due to approximation in computing the interest rate implicit in
  15. wing Interest & Principal for each year of lease period Liability Int@15% (Finance charge Rentals Principal (Rentals-Interest) 345,104.00 48,234.40 296,869.60 55,469.56 241,400.04 63,789.99 51,765.60 44,530.44 36,210.01 100,000.00 100,000.00 100,000.00 48,234.40 55,469.56 63,789.99
  16. 177,610.05 73,358.49 104,251.56 84,362.27 19,889.29 Sale & Lease Back Concept Lease SLB 26,641.51 15,637.73 Sale 100,000.00 100,000.00 Buyer SP>FMV 73,358.49 84,362.27 Operating Lease d over- i in SPFMV Case-2 CA=50 Bank a/c To Asset To a/c CA=IIO Bank a/c a/c
  17. Balance=1000/0 a/c To Asset CA=160 CA>FMV a/c Dr To Asset Bank a/c a/c PV of MLP or FMV (Sale Value) 614,460.00 61,446.00 WIL 614,460.00 To Asset 614,460.00
  18. N/A
  19. Treatment of F.L Lessee Step-I:- Step-2:- Yr-I Asset a/c Dr To Lessor PV of (MLP+UGRV) Caln of (Interest + Principal) Dr xxx Yr-I (Clg of year) Fin. Exp a/c Dr xxx To Lessor Depn a/c To Asset Lessor a/c To Bank a/c To Depn To Fin.Exp xxx xxx xxx Cr Lower of (F.M.V or P.V (MLP) xxx xxx xxx xxx xxx
  20. N/A
  21. N/A
  22. the difference, and follow as per left hand side. SPFMV 140 50
  23. 110 Difference(w/off) adjusted in P&L a/c 10 10 (160-150) 100 50 150 Both remains the same. To Asset Bank a/c To Asset To Deferred Pft Pblm 11 Page no:-221 12 140
  24. N/A
  25. Treatment of F.L Lessor Step-I:- Step-2:- YR-I Lessee a/c To Asset YR-I (End) Lessee a/c Dr To Fin.lncome Bank a/c To Lessee Fin.lncome a/c To a/c PV of (MLP+UGRV) Caln of (Fin.lncome + Principal) Dr Cr xxx (Net Inv) xxx(FMV) xxx xxx xxx xxx xxx xxx
  26. N/A
  27. N/A
  28. 140>100 90 40 (Pft amortised equally in subsequent years) 10 (FMV-CA) (150-100)
  29. 50 100 40 (Pft amortised equally in subsequent years)

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