The government has notified a new Indian Accounting Standard (Ind AS) 116 that will bring in more transparency in recognition and disclosures about leases in companies' balance sheets. Ind AS 116-implementing from April 1, 2019 -- is likely to have a significant impact on various industries, including aviation where airlines mostly operate planes on lease.
The Standard sets out the principles for the recognition, measurement, presentation, and disclosure of leases. It has been notified by the corporate affairs ministry. The standard will help in ensuring more transparency when it comes to recognition of leases by companies and also prevent ‘window dressing’ of accounts.
Leasing of aircraft rather than outright purchase is a common practice in the airlines industry worldwide. With the new accounting standard is in place, the carriers would have to show all such leases on their respective balance sheets which would result in substantial new assets and liabilitie. Ind AS 116 is the equivalent of IFRS (International Financial Reporting Standards) 116.