Library / Comprehensive Guide to Indian Accounting Standards (Ind AS)

PART 2: The Core Ind AS Standards Detailed Industry Guide

India has notified 41 Ind AS standards. However, not all are equally important in day-to-day practice. In this section, we provide detailed explanations of the standards that are most commonly used in industry, tested in interviews, and applied in consulting engagements. For each standard, we provide: the IFRS equivalent, a plain-English explanation of what the standard covers, the key rules and concepts, detailed real-world examples from Indian companies, and common interview questions.

2.1 Ind AS 1 Presentation of Financial Statements

IFRS Equivalent: IAS 1 | Old AS Equivalent: AS 1 (Disclosure of Accounting Policies)

Ind AS 1 is the “mother standard” it lays down the overall framework for how financial statements should be structured, what they must contain, and the fundamental principles that apply to all other standards. If you think of Ind AS as a building, Ind AS 1 is the foundation on which everything else is built.

2.1.1 The Complete Set of Financial Statements

Under Ind AS 1, every company must prepare FIVE financial statements (plus comparative figures for the previous year). Let us understand each one in detail:

(a) Balance Sheet (Statement of Financial Position): This is a snapshot of the company’s financial position on a specific date (usually 31st March for Indian companies). It answers three questions: What does the company OWN? (Assets cash, buildings, machines, inventory, receivables, investments, intangible assets). What does the company OWE? (Liabilities loans, payables to suppliers, tax payable, provisions, lease liabilities). What belongs to the shareholders? (Equity share capital, reserves, retained earnings, OCI balances). The fundamental equation is: Assets = Liabilities + Equity. This must ALWAYS balance hence the name Balance Sheet.

(b) Statement of Profit and Loss (P&L): This is a movie (not a snapshot) it shows what happened DURING the year (1st April to 31st March). It captures: Revenue (sales, service income, interest income), Expenses (cost of materials, employee costs, depreciation, finance costs, other expenses), Profit or Loss (Revenue minus Expenses), and Other Comprehensive Income (OCI items as discussed in Section 1.4.3). The net result is Total Comprehensive Income = Profit or Loss + OCI.

(c) Statement of Changes in Equity (SOCIE): This shows how the shareholders’ equity section of the Balance Sheet changed during the year. It tracks: Opening balance of each equity component (share capital, securities premium, retained earnings, OCI reserves). Changes during the year: new shares issued, dividends paid, profit for the year transferred to retained earnings, OCI movements, share buybacks. Closing balance. This is important because investors want to know how their stake changed.

(d) Statement of Cash Flows (Ind AS 7): The P&L shows “accounting profit” which includes non-cash items like depreciation. The Cash Flow Statement shows ACTUAL cash movements, classified into three activities: Operating Activities (cash from core business collections from customers, payments to suppliers, salaries, taxes), Investing Activities (cash for long-term assets buying/selling equipment, investments, acquisitions), and Financing Activities (cash from/to funders borrowings, repayments, dividends, share issues). The Cash Flow Statement bridges the gap between profit and cash a company can be profitable but cash-strapped (or vice versa).

(e) Notes to Financial Statements: These are the most detailed and often the most informative part of the annual report. In Reliance’s annual report, the Notes run to 100+ pages. They include: Summary of significant accounting policies (how does the company recognise revenue, depreciate assets, value inventory, etc.), Detailed breakdowns of every line item (what’s inside “Other Expenses”?), Related party transactions, Contingent liabilities, Segment information, Fair value disclosures, Risk management disclosures (credit risk, liquidity risk, market risk), and Deferred tax breakdowns.

2.1.2 Fundamental Principles in Ind AS 1

Going Concern: Financial statements are prepared on the assumption that the company will continue to operate for at least 12 months from the Balance Sheet date. This means assets are valued at their “in-use” value (not liquidation value). If there is material uncertainty about whether the company can continue as a going concern (e.g., it is unable to pay its debts, facing insolvency proceedings, or dependent on a single contract that may not be renewed), this must be disclosed prominently. During COVID-19 in 2020, many companies had to explicitly state in their Notes whether they could continue as a going concern, given the unprecedented economic disruption.

Accrual Basis: As explained in Section 1.4.2, all transactions are recorded when they happen, not when cash moves. This is mandatory under Ind AS 1, except for the Cash Flow Statement (which, by definition, follows the cash basis).

Materiality and Aggregation: A piece of information is “material” if omitting it, or misstating it, could influence the economic decisions of users. Companies are not required to disclose immaterial items separately. For example, if Reliance Industries buys a ₹50,000 printer, it does not need a separate line item in the Balance Sheet it can be aggregated with other small items in “Other Assets.” But a ₹5,000 crore investment would definitely need separate disclosure because investors’ decisions could be influenced by it. Materiality is judgemental it depends on the size of the item relative to the size of the company.

Offsetting (Netting Off): Generally, companies must NOT offset (net off) assets against liabilities or income against expenses. A company with ₹1,000 crore in receivables and ₹800 crore in payables cannot simply show “Net ₹200 crore.” Both must be shown separately because they represent different rights and obligations. However, there are specific exceptions where netting is allowed (e.g., deferred tax assets and liabilities of the same entity and tax authority can be netted under Ind AS 12).

Comparative Information: Every number in the financial statements must be accompanied by the corresponding figure from the previous year. So the Balance Sheet as at 31 March 2026 must also show the Balance Sheet as at 31 March 2025 side by side. This allows users to see trends. If a company restates its previous year figures (due to a policy change or error correction under Ind AS 8), it must present THREE balance sheets (current year, previous year as restated, and the opening balance of the previous year).

2.2 Ind AS 8 Accounting Policies, Changes in Estimates, and Errors

IFRS Equivalent: IAS 8 | Old AS Equivalent: AS 5 (Net Profit for the Period, Prior Period Items, Changes in Accounting Policies)

This standard governs three distinct situations that significantly impact financial statements: changes in accounting policies, changes in accounting estimates, and corrections of errors. Understanding the difference between these three situations is critical because the accounting treatment is completely different for each.

2.2.1 Change in Accounting Policy Retrospective Application

What is an Accounting Policy? An accounting policy is the specific principle, basis, convention, or rule adopted by a company in preparing its financial statements. For example: the method used to value inventory (FIFO vs Weighted Average), the method of depreciation (SLM vs WDV), the basis for revenue recognition, the approach to measuring financial instruments, and so on.

When can a policy be changed? A company can change its accounting policy ONLY if: (a) it is required by a new or amended Ind AS standard, OR (b) the change results in the financial statements providing more reliable and relevant information. A change in accounting policy is NOT just a preference there must be a genuine reason, and it must be disclosed.

How is the change applied? RETROSPECTIVELY. This means the company must go back and restate its previous year’s financial statements as if the new policy had ALWAYS been used. The opening balance of retained earnings for the earliest period presented is adjusted, and all comparative figures are restated.

2.2.2 Change in Accounting Estimate Prospective Application

What is an Accounting Estimate? Many items in financial statements cannot be measured precisely and must be estimated. Common estimates include: the useful life and residual value of PPE (for depreciation), the provision for bad debts (expected credit losses), the provision for warranty claims, the fair value of unlisted investments, the actuarial assumptions for gratuity (salary growth rate, attrition rate, discount rate), and the estimated costs to complete a construction contract.

How is a change in estimate applied? PROSPECTIVELY. This means the change affects ONLY the current year and future years. Past years are NOT restated. The logic is simple: when the company originally made the estimate, it used the best information available at that time. The estimate was reasonable then. New information has now become available, so the estimate is updated going forward.

2.2.3 Correction of Errors Retrospective Restatement

What is a prior period error? A prior period error is an omission from, or misstatement in, previous financial statements arising from a failure to use (or misuse of) reliable information that was available when those statements were authorised. Examples: mathematical mistakes, mistakes in applying accounting policies, fraud, oversight of facts.

How are errors corrected? RETROSPECTIVELY. The company must restate the comparative figures for the prior period in which the error occurred. If the error occurred before the earliest period presented, the opening balances of assets, liabilities, and equity for the earliest period are restated. This is similar to a change in accounting policy the goal is to present financial statements as if the error never happened.

2.4 Ind AS 16 Property, Plant and Equipment (PPE)

IFRS Equivalent: IAS 16 | Old AS Equivalent: AS 10 (Accounting for Fixed Assets)

PPE are the tangible, long-term assets that a company uses in its business operations for more than one year. This includes land, buildings, plant and machinery, vehicles, computers, furniture, and fixtures. For manufacturing companies like Tata Steel, Maruti Suzuki, and Reliance Industries, PPE is often the single largest asset on the Balance Sheet, running into tens of thousands of crores.

2.4.1 When Do You Recognise an Item as PPE? (Recognition Criteria)

An item of PPE is recognised as an asset (put on the Balance Sheet) when and ONLY when TWO conditions are met:

(a) It is probable that future economic benefits associated with the item will flow to the entity: This means the company expects to use the asset to generate revenue, reduce costs, or produce other benefits in the future. A machine that will manufacture products for 10 years clearly meets this test. A broken machine with no spare parts does not.

(b) The cost of the item can be measured reliably: There must be a clear, verifiable cost. The purchase invoice, freight bills, installation costs, and customs duty can all be added up to determine the total cost.

2.4.2 What is Included in the Cost of PPE?

The cost of PPE is NOT just the price tag. It includes everything needed to get the asset to its working condition and intended location:

(a) Purchase Price: Net of trade discounts and rebates (but gross of cash discounts since those relate to payment timing).

(b) Import Duties and Non-Refundable Purchase Taxes: If Maruti imports a CNC machine from Japan, the customs duty (non-refundable) is added to the machine’s cost. However, GST input credit (which is refundable) is NOT added.

(c) Directly Attributable Costs: These include: site preparation (clearing land, building a foundation), delivery and handling costs, installation and assembly costs (engineers’ fees to set up the machine), testing costs (trial runs to ensure the machine works correctly minus any revenue from test products sold), and professional fees (architect fees for a building, consulting engineer fees for a plant).

(d) Borrowing Costs (Ind AS 23): If the company borrows money to build a qualifying asset (one that takes a substantial period to get ready like a factory or power plant), the interest cost during the construction period is added to the asset’s cost, not expensed in P&L. Example: If Reliance borrows ₹5,000 crore at 8% to build a new refinery that takes 3 years to complete, the interest during those 3 years (₹1,200 crore) is added to the refinery’s cost on the Balance Sheet.

(e) Decommissioning / Asset Retirement Obligation: If the company is legally required to dismantle the asset and restore the site after the asset’s useful life (common in oil & gas, mining, and nuclear industries), the estimated cost of decommissioning (discounted to present value under Ind AS 37) is added to the asset’s cost on Day 1, with a corresponding provision (liability).

What is NOT included in PPE cost: Administration and general overhead costs (unless directly attributable), costs of opening a new facility or business (marketing, advertising), costs of conducting business in a new location, training costs for staff to operate the machine. These are all expensed in P&L as incurred.

2.4.3 Depreciation Under Ind AS 16 (Detailed Explanation)

What is Depreciation? Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. In simple terms, it is the process of spreading the cost of an asset over the years it will be used, recognising that the asset is being “consumed” each year.

Depreciable Amount = Cost − Residual Value. The Residual Value (also called scrap value or salvage value) is the estimated amount the company expects to get when it disposes of the asset at the end of its useful life. For example, if a truck costs ₹20 lakh and Maruti expects to sell it for ₹2 lakh as scrap after 10 years, the depreciable amount is ₹18 lakh.

Methods of Depreciation allowed under Ind AS 16:

Straight-Line Method (SLM): Equal depreciation charge every year. Depreciation = (Cost − Residual Value) / Useful Life. Example: Machine cost ₹100 crore, residual value ₹10 crore, useful life 10 years. Annual depreciation = (₹100 − ₹10) / 10 = ₹9 crore per year. This method is most commonly used by Indian companies and is the simplest to understand.

Written Down Value Method (WDV / Diminishing Balance): Higher depreciation in early years, lower in later years. A fixed percentage is applied to the reducing book value each year. Example: Machine cost ₹100 crore, WDV rate 15%. Year 1: 15% of ₹100 = ₹15 crore. Year 2: 15% of ₹85 = ₹12.75 crore. Year 3: 15% of ₹72.25 = ₹10.84 crore. This method front-loads depreciation, which is suitable for assets that lose value quickly (like vehicles and technology).

Units of Production Method: Depreciation is based on actual usage, not time. Example: A printing machine can produce 10 million copies over its life. Cost = ₹10 crore. Depreciation per copy = ₹1. If 2 million copies are produced in Year 1, depreciation = ₹2 crore. If 1 million copies in Year 2, depreciation = ₹1 crore. This method is common in mining (depreciation per tonne extracted) and manufacturing.

2.4.4 Component Accounting (A Major Change from Old AS)

This is one of the most significant changes Ind AS 16 brought compared to old AS 10. Under component accounting, if a single asset has parts with significantly different useful lives, each part (component) must be identified and depreciated separately.

2.8 Ind AS 115 Revenue from Contracts with Customers

IFRS Equivalent: IFRS 15 | Old AS Equivalent: AS 9 (Revenue Recognition) + AS 7 (Construction Contracts)

Revenue recognition is arguably the single most important accounting topic for any business. Revenue is the starting point of the Profit & Loss statement, it drives valuations, it affects management bonuses, and it is the number that investors watch most closely. Getting revenue recognition wrong can lead to financial restatements, regulatory penalties, and even fraud accusations.

Before Ind AS 115, India had two separate standards for revenue: AS 9 for general revenue (based on “risks and rewards” transfer) and AS 7 for construction contracts (based on percentage-of-completion method). Ind AS 115 replaced BOTH with a single, unified 5-Step Model that applies to ALL types of contracts with customers. This was one of the biggest changes in accounting history.

2.8.1 The 5-Step Revenue Recognition Model (Detailed Walkthrough)

STEP 1: Identify the Contract with a Customer

A contract is an agreement between two or more parties that creates enforceable rights and obligations. Under Ind AS 115, a contract exists when ALL of the following criteria are met: (a) The parties have approved the contract (written, oral, or implied by business practice). (b) Each party’s rights regarding goods/services to be transferred can be identified. (c) Payment terms can be identified. (d) The contract has “commercial substance” (future cash flows are expected to change). (e) It is probable that the company will collect the consideration.

If these criteria are not met, any cash received is treated as a deposit/liability (not revenue) until the criteria are met or the contract is terminated.

STEP 2: Identify the Performance Obligations in the Contract

A Performance Obligation is a promise to transfer a distinct good or service to the customer. This is where the analysis gets interesting, because many contracts bundle multiple deliverables together.

When is a good or service “distinct”? It is distinct if BOTH of the following are met: (a) The customer can benefit from the good or service on its own or together with readily available resources (i.e., it has standalone value). (b) The company’s promise to transfer the good or service is separately identifiable from other promises in the contract (i.e., it is not highly interrelated or interdependent with other deliverables).

STEP 3: Determine the Transaction Price

The transaction price is the amount of consideration the company expects to be entitled to in exchange for the goods/services. This sounds simple but can be complex when the contract includes:

Variable Consideration: Discounts, rebates, penalties, performance bonuses, incentives, returns. Example: If TCS has a contract with a performance bonus of ₹20 crore if certain SLA targets are met, TCS must estimate the probability of earning this bonus and include it in the transaction price (using either the “expected value” method or “most likely amount” method). But there is a constraint: variable consideration is included ONLY to the extent that it is “highly probable” that a significant revenue reversal will NOT occur later.

Significant Financing Component: If payment is significantly deferred (e.g., pay after 3 years) or significantly prepaid (e.g., customer pays 100% upfront for a 5-year service), the contract has a financing element. The transaction price must be adjusted for the time value of money. Example: If a customer pays ₹100 crore upfront for a 5-year support contract, the company must impute interest part of the payment is the service price and part is effectively interest for the advance payment. Practical exception: if the time gap between delivery and payment is 12 months or less, no adjustment is needed.

Non-Cash Consideration: If the customer pays in shares, assets, or barter, the consideration is measured at fair value.

STEP 4: Allocate the Transaction Price to Performance Obligations

If the contract has multiple performance obligations, the total transaction price must be allocated to each obligation based on their relative Standalone Selling Prices (SSP). The SSP is the price at which the company would sell each good or service separately.

STEP 5: Recognise Revenue When (or As) Each Performance Obligation is Satisfied

Each performance obligation is satisfied either “over time” (continuous) or “at a point in time” (discrete). This determines WHEN revenue is recognised.

Revenue is recognised OVER TIME if any ONE of these criteria is met: (a) The customer simultaneously receives and consumes the benefits as the company performs (e.g., a cleaning service the office is being cleaned as the service provider works). (b) The company’s performance creates or enhances an asset that the customer controls as it is created (e.g., constructing a building on the customer’s land). (c) The company’s performance does not create an asset with alternative use to the company, AND the company has an enforceable right to payment for performance completed to date.

If NONE of the above criteria is met, revenue is recognised AT A POINT IN TIME specifically, at the point when control transfers to the customer. Indicators of control transfer include: the company has a right to payment, the customer has legal title, the customer has physical possession, the customer has the significant risks and rewards, and the customer has accepted the asset.

2.8.2 Contract Assets, Contract Liabilities, and Key Terms

Contract Asset (Unbilled Revenue): The company has performed (delivered goods or services) but has not yet billed the customer. This creates a right to receive payment that is conditional on further performance or the passage of time. Example: TCS completes 60% of a project by 31 March but invoices only on completion milestones. The 60% revenue recognised but not yet billed is a Contract Asset on the Balance Sheet.

Trade Receivable: The company has billed the customer AND the right to payment is unconditional (only the passage of time is required for payment). When TCS raises the invoice, the Contract Asset becomes a Trade Receivable.

Contract Liability (Unearned Revenue / Advance from Customer): The company has received cash (or billed) but has NOT yet performed. Example: HCL Tech receives ₹20 crore advance for a project starting next quarter. This ₹20 crore is a Contract Liability until HCL performs the work.

2.9 Ind AS 109 Financial Instruments

IFRS Equivalent: IFRS 9 | Old AS Equivalent: AS 13 (Investments) + AS 11 (Foreign Exchange)

Ind AS 109 is one of the most complex and far-reaching standards. It governs how companies account for ALL financial instruments which means virtually every transaction that involves money, from simple trade receivables to complex derivatives. For banking and financial services companies (HDFC Bank, SBI, Bajaj Finance), this standard fundamentally changed how they report their numbers.

2.9.1 What is a Financial Instrument?

A Financial Instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

This sounds abstract, so let us list common examples: Cash and bank balances (financial asset), Trade receivables (financial asset customers owe you money), Investments in shares (financial asset), Investments in bonds/debentures (financial asset), Mutual fund units (financial asset), Loans given to employees or subsidiaries (financial asset), Trade payables (financial liability you owe suppliers money), Borrowings from banks (financial liability), Debentures/bonds issued (financial liability), Derivatives like forwards, futures, options, swaps (can be asset or liability depending on fair value).

2.9.2 Classification of Financial Assets The Three-Box Model

Under Ind AS 109, every financial asset must be classified into one of three categories based on TWO tests: (1) The Business Model Test what is the company’s objective for holding this financial asset? and (2) The SPPI Test (Solely Payments of Principal and Interest) do the contractual cash flows represent solely payments of principal and interest?

Category 1: Amortised Cost

When used: The business model is to HOLD the asset to COLLECT contractual cash flows (not to sell it), AND the cash flows pass the SPPI test (they are just principal and interest, not something exotic like equity-linked returns).

How measured: Initially at fair value (usually the amount lent or invested), then at amortised cost using the Effective Interest Rate (EIR) method. Any premium or discount is amortised over the life of the instrument.

P&L impact: Interest income calculated using the EIR goes to P&L. Impairment losses (ECL) go to P&L. Fair value changes are NOT recognised (because the asset is not being sold, so market fluctuations are irrelevant).

Category 2: Fair Value through Other Comprehensive Income (FVOCI)

When used: The business model is to BOTH collect contractual cash flows AND sell the assets (a dual objective), AND the cash flows pass the SPPI test. Also, for equity instruments, a company can make an IRREVOCABLE election at initial recognition to classify them as FVOCI (this is useful for strategic equity investments the company does not intend to trade).

How measured: At fair value on the Balance Sheet. For debt instruments: fair value changes go to OCI, but interest income (EIR) and ECL go to P&L. When sold, the cumulative OCI amount is “recycled” (transferred) to P&L. For equity instruments under irrevocable election: fair value changes go to OCI and are NEVER recycled to P&L (even when sold). Only dividends go to P&L.

Category 3: Fair Value through Profit or Loss (FVTPL)

When used: Everything that does not fit into the above two categories. This includes: assets held for trading, assets that fail the SPPI test (e.g., convertible bonds with equity-linked returns), ALL derivatives (except those designated as hedging instruments), and any asset the company voluntarily designates as FVTPL to avoid an accounting mismatch.

How measured: At fair value on the Balance Sheet. ALL fair value changes go directly to P&L. This means the P&L will be volatile if the stock market crashes, all FVTPL investments will show losses in the P&L immediately.

2.9.3 Expected Credit Loss (ECL) Model A Paradigm Shift

The ECL model is one of the most significant changes brought by Ind AS 109. Under old AS, companies used the “Incurred Loss Model” they recognised bad debts only when there was objective evidence of a loss event (the borrower defaulted, the receivable became overdue by many months). This was backward-looking and reactive.

Under Ind AS 109’s ECL model, companies must recognise credit losses BEFORE they occur based on what they EXPECT, using forward-looking information. This means even on Day 1, when a brand-new loan is given, the bank must estimate and recognise some level of expected credit loss.

The Three-Stage Model (for debt instruments at Amortised Cost or FVOCI):

Stage 1 Performing (no significant increase in credit risk since origination): Recognise 12-month ECL expected credit losses resulting from default events possible within the next 12 months. For example, a brand-new performing home loan with no stress signals is in Stage 1. The bank estimates the probability of default in the next 12 months and provides accordingly.

Stage 2 Significant Increase in Credit Risk (but not yet credit-impaired): Recognise Lifetime ECL expected credit losses over the ENTIRE remaining life of the instrument. An asset moves to Stage 2 when there has been a significant increase in credit risk since origination. Triggers could include: borrower missed one EMI, borrower’s credit rating was downgraded, the borrower’s industry is facing a downturn, or the loan was restructured.

Stage 3 Credit-Impaired (defaulted or near-default): Recognise Lifetime ECL, AND interest income is now calculated on the NET carrying amount (after deducting the loss allowance) rather than the gross amount. This reduces the interest income recognised. Triggers: borrower is 90+ days past due, borrower is in insolvency, significant financial difficulty.

Simplified Approach for Trade Receivables: For trade receivables (money owed by customers), Ind AS 109 allows a simplified approach. Companies do not need to track stage movements. Instead, they directly calculate Lifetime ECL using a Provision Matrix based on historical default rates. Example: Maruti Suzuki analyses its past 5 years of trade receivable data and finds: receivables 0-30 days overdue have a 0.5% default rate, 31-60 days: 2%, 61-90 days: 5%, 90+ days: 15%. Maruti applies these rates to its current receivable balances to calculate the ECL provision.

2.10 Ind AS 116 Leases

IFRS Equivalent: IFRS 16 | Old AS Equivalent: AS 19 (Leases)

Ind AS 116 is called a “game-changer” standard because it fundamentally altered the balance sheets of companies across industries, especially those that rely heavily on leased assets airlines (aircraft), retail (store premises), telecom (tower space), IT (office buildings), and logistics (warehouses).

2.10.1 The Problem Ind AS 116 Solved

Under the old standard (AS 19), leases were classified into two types: Finance Leases (where the lessee essentially “owns” the asset these went on the balance sheet) and Operating Leases (where the lessee just “rents” the asset these stayed OFF the balance sheet, with only the lease rent appearing as an expense in P&L).

The problem was that companies aggressively structured leases to qualify as “operating” leases to keep massive liabilities off their balance sheets. An airline like IndiGo operating 300+ leased aircraft worth tens of thousands of crores showed ZERO lease liabilities on its balance sheet. Investors were being misled about the true level of the company’s obligations.

2.10.2 What Changed Under Ind AS 116?

For Lessees (the party using the leased asset): The operating lease vs finance lease distinction is ELIMINATED. Almost ALL leases must now be brought onto the balance sheet. The lessee records:

A Right-of-Use (ROU) Asset: This represents the lessee’s right to use the leased asset for the lease term. It is measured initially at the present value of lease payments (same as the lease liability) plus any initial direct costs, advance lease payments, and estimated restoration costs. The ROU asset is then depreciated over the shorter of the lease term and the asset’s useful life.

A Lease Liability: This represents the obligation to make lease payments. It is measured at the present value of future lease payments, discounted using the interest rate implicit in the lease (or the lessee’s incremental borrowing rate if the implicit rate is not available). Each lease payment is split into principal repayment (reduces the liability) and interest (goes to P&L as finance cost).

2.10.3 Impact on Key Financial Ratios

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