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September 2022

Letters to The Editor

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Reading Time 2 mins
Dear Sir,

This has reference to the article “Rethinking the Ind AS-116 Lease Standard’ by Mr. H.J.Tavaraia in the July, 2022 issue of BCAJ. Whilst the article is well thought of, there are certain comments which I would like to offer:

  • The issue raised on increase in the work load for millions of lessees does not cut much ice since Ind AS does provide exemptions for leases which are less than 1 year and low value leases. Further, with data recorded and processed electronically, the increase in the work load if at all will be marginal. It is at best a different way of analysing and processing transactions.

  • On the issue of “no asset cover”, the lenders in any case would keep in mind the fact that ROUs represent intangible assets which they would appropriately factor in whilst laying down the terms and covenants.

  • The issue of severe distortion due to a rise in EBITA and ROCE is mitigated due to the fact that it will be similar across the main user industries.

  • The shift in the net operating cash flow improving but net financing activities having a greater pay-out is an economic reality which we cannot escape from.

  • Some of the disclosures whilst being relevant should not lead to an overkill since Ind AS-116 already provides for enough relevant disclosures.

To conclude, IndAS-116 itself represents a rethink reflectin
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