ASC 842 vs. Ind AS 116

Attribute	ASC 842	Ind AS 116
Scope	Applies to all entities	Applies to lessees only
Definition of Lease	More detailed definition	Similar definition
Recognition of Lease Liability	Recognized on balance sheet	Recognized on balance sheet
Recognition of Right-of-Use Asset	Recognized on balance sheet	Recognized on balance sheet
Measurement of Lease Liability	Present value of lease payments	Present value of lease payments
Measurement of Right-of-Use Asset	Initial measurement at lease liability amount	Initial measurement at lease liability amount

Background

ASC 842 and Ind AS 116 are two accounting standards that deal with lease accounting. ASC 842 is the Financial Accounting Standards Board (FASB) standard for lease accounting in the United States, while Ind AS 116 is the Indian Accounting Standards Board standard for lease accounting in India. Both standards were introduced to bring more transparency and accuracy to lease accounting practices.

Scope

ASC 842 and Ind AS 116 have a similar scope in that they both apply to all leases, with some exceptions. Both standards require lessees to recognize assets and liabilities for all leases with terms longer than 12 months on their balance sheets. However, there are some differences in the scope of the two standards. ASC 842 includes specific guidance on how to account for land easements, while Ind AS 116 does not address this issue.

Recognition and Measurement

ASC 842 and Ind AS 116 differ in their approach to recognition and measurement of lease assets and liabilities. Under ASC 842, lessees are required to recognize a right-of-use asset and a lease liability for all leases, while under Ind AS 116, lessees are also required to recognize a right-of-use asset and a lease liability for all leases. However, there are some differences in how the two standards measure lease assets and liabilities. ASC 842 requires lessees to measure lease liabilities using the interest rate implicit in the lease, while Ind AS 116 allows lessees to use the incremental borrowing rate.

Lease Term

ASC 842 and Ind AS 116 have different requirements when it comes to determining the lease term. Under ASC 842, the lease term includes the non-cancellable period of the lease and any periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option. In contrast, Ind AS 116 defines the lease term as the non-cancellable period of the lease and any periods covered by an option to extend the lease if the lessee is reasonably certain not to exercise that option.

Transition

ASC 842 and Ind AS 116 have different transition requirements. ASC 842 requires lessees to apply the standard using a modified retrospective approach, which means that lessees must recognize and measure leases that were previously classified as operating leases on their balance sheets as of the beginning of the earliest comparative period presented. In contrast, Ind AS 116 requires lessees to apply the standard using a full retrospective approach, which means that lessees must restate prior periods as if the standard had always been in effect.

Disclosure Requirements

ASC 842 and Ind AS 116 have similar disclosure requirements, but there are some differences in the details. Both standards require lessees to disclose information about their lease arrangements, including the nature of the leases, the amount of lease liabilities, and the maturity of lease liabilities. However, ASC 842 includes specific requirements for disclosing the amount of variable lease payments recognized in the period, while Ind AS 116 does not have this specific requirement.

Conclusion

In conclusion, ASC 842 and Ind AS 116 are two important accounting standards that aim to improve lease accounting practices. While both standards have similar scopes and objectives, there are some key differences in their recognition and measurement requirements, lease term definitions, transition approaches, and disclosure requirements. Companies operating in the United States and India must carefully consider these differences when implementing the standards to ensure compliance and accurate financial reporting.