Financial Reporting (Ind AS)Question 5824 of 11
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Under Ind AS 116 'Leases', at the commencement date, how is the lessee's Lease Liability initially measured?

Options

AAt the fair value of the leased asset.
BAt the present value of the lease payments that are not paid at that date, discounted using the interest rate implicit in the lease (or incremental borrowing rate).
CAt undiscounted total contractual lease payments over the lease term.
DAt the lower of fair value and present value of minimum lease payments.
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Correct Answer

✅ Option B — At the present value of the lease payments that are not paid at that date, discounted using the interest rate implicit in the lease (or incremental borrowing rate).

All Options:

  • AAt the fair value of the leased asset.
  • BAt the present value of the lease payments that are not paid at that date, discounted using the interest rate implicit in the lease (or incremental borrowing rate). ✓
  • CAt undiscounted total contractual lease payments over the lease term.
  • DAt the lower of fair value and present value of minimum lease payments.

Detailed Solution & Explanation

Correct Answer: Option **B** Explanation: Under Ind AS 116 paragraph 26, at the commencement date, a lessee measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments shall be discounted using the interest rate implicit in the lease, if readily determinable; otherwise, the lessee's incremental borrowing rate is used.

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