This document provides an overview of IFRS 16 Leases. It discusses the development of IFRS 16 and key changes from the previous standard IAS 17, including eliminating the classification of leases as either operating or finance for lessees. For lessees, IFRS 16 requires recognition of a right-of-use asset and lease liability. For lessors, the accounting remains similar to IAS 17. The document also covers determining whether an arrangement contains a lease, lease accounting treatment for both lessees and lessors, and provides an example of accounting for a lease over its term.
The document provides an overview of IFRS 16 Leases by Fred Nieto, Head of Investor Engagement at the IASB. It discusses key facts about IFRS 16 including the sectors most affected, the effective date of 2019, and accounting changes for lessees and lessors. The presentation then covers the essentials of IFRS 16 including the definition of a lease, recognition of right-of-use assets and lease liabilities, income statement impact, and intended benefits of improved comparability. Finally, it discusses new disclosure requirements and how restatement under the new standard will work.
Assurance and advisory firm Nkonki will be hosting a roundtable session exclusively for CFOs with Darrel Scott, Board Member of the IFRS Foundation. Scott, who is in Johannesburg for the occasion, will provide global and industry insights on the newly-released IFRS 16, issued on 13 January 2016, to CFOs from many of South Africa’s leading companies.
“The session is designed to share insights and deliberate on how this new accounting standard will impact processes and financial reporting, and how industries across the globe will deal with this change,” says Sindi Zilwa, CEO of Nkonki. It will also provide an update on accounting developments in the medium term.
The International Accounting Standards Board (IASB) issued IFRS 16 Leases in January 2016. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, namely, the customer (‘lessee’) and the supplier (‘lessor’). IFRS 16 is effective from 1 January 2019. IFRS 16 completes the IASB’s project to improve the financial reporting of leases. IFRS 16 replaces the previous leases Standard, IAS 17 Leases, and related Interpretations.
Here is an example of the accounting entries by the lessor APIN for the finance lease:
1 Jan 20X1 (inception of lease)
Dr Receivable $5,710
Cr Machinery $5,710
To record the net investment in the finance lease as a receivable, equal to the present value of lease payments.
31 Dec 20X1
Dr Cash $2,000
Dr Interest income $570
Cr Receivable $2,570
To record receipt of the annual lease payment, and unwind interest on the receivable balance.
The balance sheet will show the receivable of $3,180 as a non-current asset. The income statement will include interest
IFRS-16 requires all leases to be recognized on the balance sheet except for short-term or low-value leases. For finance leases, lessees record a lease liability and right-of-use asset on the balance sheet. Lease modifications require remeasuring the lease liability and right-of-use asset. Sale-leaseback transactions require derecognizing the asset sold and recognizing a right-of-use asset and lease liability. Lessors record a net investment in leases on the balance sheet and recognize finance income over the lease term. Intermediate lessors account for sub-leases by derecognizing the head lease right-of-use asset and recognizing a net investment in the
This document outlines the requirements for operating/reporting segments under IFRS 8. Key points include:
1) Operating segments are components of a business for which separate financial information is available and regularly reviewed by chief decision makers.
2) Segments are typically defined based on products, services, regions, or major customers.
3) Similar segments can be combined if they have similar economic characteristics, products/services, customers, distribution, or regulatory environments.
4) A segment must constitute over 10% of certain financial statement items or be reviewed by management to qualify for separate reporting.
This document summarizes the key principles of IAS 16, which provides guidance on accounting for property, plant, and equipment. Some of the main points covered include: initially measuring property, plant, and equipment at cost; depreciating the asset over its useful life; testing for impairment if the carrying amount is not recoverable; and allowing the alternative treatment of revaluing assets to fair value. Extensive disclosure requirements are also outlined relating to classes of property, plant and equipment, depreciation methods, and revalued amounts.
The document provides an overview of IFRS 16 Leases by Fred Nieto, Head of Investor Engagement at the IASB. It discusses key facts about IFRS 16 including the sectors most affected, the effective date of 2019, and accounting changes for lessees and lessors. The presentation then covers the essentials of IFRS 16 including the definition of a lease, recognition of right-of-use assets and lease liabilities, income statement impact, and intended benefits of improved comparability. Finally, it discusses new disclosure requirements and how restatement under the new standard will work.
Assurance and advisory firm Nkonki will be hosting a roundtable session exclusively for CFOs with Darrel Scott, Board Member of the IFRS Foundation. Scott, who is in Johannesburg for the occasion, will provide global and industry insights on the newly-released IFRS 16, issued on 13 January 2016, to CFOs from many of South Africa’s leading companies.
“The session is designed to share insights and deliberate on how this new accounting standard will impact processes and financial reporting, and how industries across the globe will deal with this change,” says Sindi Zilwa, CEO of Nkonki. It will also provide an update on accounting developments in the medium term.
The International Accounting Standards Board (IASB) issued IFRS 16 Leases in January 2016. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, namely, the customer (‘lessee’) and the supplier (‘lessor’). IFRS 16 is effective from 1 January 2019. IFRS 16 completes the IASB’s project to improve the financial reporting of leases. IFRS 16 replaces the previous leases Standard, IAS 17 Leases, and related Interpretations.
Here is an example of the accounting entries by the lessor APIN for the finance lease:
1 Jan 20X1 (inception of lease)
Dr Receivable $5,710
Cr Machinery $5,710
To record the net investment in the finance lease as a receivable, equal to the present value of lease payments.
31 Dec 20X1
Dr Cash $2,000
Dr Interest income $570
Cr Receivable $2,570
To record receipt of the annual lease payment, and unwind interest on the receivable balance.
The balance sheet will show the receivable of $3,180 as a non-current asset. The income statement will include interest
IFRS-16 requires all leases to be recognized on the balance sheet except for short-term or low-value leases. For finance leases, lessees record a lease liability and right-of-use asset on the balance sheet. Lease modifications require remeasuring the lease liability and right-of-use asset. Sale-leaseback transactions require derecognizing the asset sold and recognizing a right-of-use asset and lease liability. Lessors record a net investment in leases on the balance sheet and recognize finance income over the lease term. Intermediate lessors account for sub-leases by derecognizing the head lease right-of-use asset and recognizing a net investment in the
This document outlines the requirements for operating/reporting segments under IFRS 8. Key points include:
1) Operating segments are components of a business for which separate financial information is available and regularly reviewed by chief decision makers.
2) Segments are typically defined based on products, services, regions, or major customers.
3) Similar segments can be combined if they have similar economic characteristics, products/services, customers, distribution, or regulatory environments.
4) A segment must constitute over 10% of certain financial statement items or be reviewed by management to qualify for separate reporting.
This document summarizes the key principles of IAS 16, which provides guidance on accounting for property, plant, and equipment. Some of the main points covered include: initially measuring property, plant, and equipment at cost; depreciating the asset over its useful life; testing for impairment if the carrying amount is not recoverable; and allowing the alternative treatment of revaluing assets to fair value. Extensive disclosure requirements are also outlined relating to classes of property, plant and equipment, depreciation methods, and revalued amounts.
IFRS 16 requires lessees to recognize most leases on their balance sheets. It establishes a single lessee accounting model, requiring lessees to recognize a right-of-use asset and lease liability for all leases, with exemptions for short-term leases and leases of low value assets. For lessors, accounting remains similar to the current standard IAS 17. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted. The new standard will significantly change lessee accounting and financial reporting and may impact many entities across various industries.
This document provides an overview of IAS 23 Borrowing Costs. It discusses the core principle that borrowing costs directly attributable to qualifying assets form part of the cost of that asset. Qualifying assets are those that take a substantial period of time to get ready for use or sale, such as inventories, plants, and properties. Borrowing costs can be capitalized when probable future benefits exist and costs can be reliably measured. The document also outlines the recognition, eligibility, commencement, suspension, and cessation of capitalization of borrowing costs, as well as required disclosures.
This document provides an overview of International Accounting Standard IAS 12 on income taxes. It defines key terms like accounting profit, taxable profit, current tax and deferred tax. It explains how to recognize current tax liabilities and assets, and the treatment of tax losses carried back. Deferred tax arises from temporary differences between the carrying amount of assets/liabilities and their tax base. These can be taxable or deductible temporary differences. Deferred tax is measured using the balance sheet approach by comparing carrying amounts to tax bases.
IFRS 16 introduces significant changes to lease accounting that will primarily affect the accounting treatment of operating leases which were previously off-balance sheet. The new standard requires lessees to recognize a right-of-use asset and lease liability for all leases with a term of more than 12 months, unless the underlying asset is low value. It introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset is of low value. Lessor accounting remains substantially unchanged from IAS 17. The document provides an overview of the key changes and accounting requirements under IFRS 16.
The document outlines Accounting Standard 19 on leases. It discusses the scope, objectives and classification of leases as either finance leases or operating leases. Finance leases transfer substantially all risks and rewards of ownership to the lessee. It provides examples of finance leases and indicators. It also discusses accounting treatment, disclosures and illustrations for lessors and lessees for both finance and operating leases.
IFRS 15 Revenue from contracts with customers Nadir Malik
IFRS 15 Revenue from contracts with customers
Overview of new Standard
Back ground of revenue recognition standard
5 step Model
Contract Cost
Specific guidance
Transition
Presentation and Disclosure
Impacts, challenges and issues
Q&A discussion
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The document discusses IFRS 2, which provides guidance on accounting for share-based payment transactions. It summarizes key aspects of IFRS 2 including scope, valuation techniques, vesting conditions, journal entries, tax treatment, transition, and disclosure requirements. Valuation of share options requires estimation and the use of models, with complexity depending on factors like performance conditions. An expense is recognized over the vesting period and adjustments made if fair value estimates change.
This standard provides guidance on disclosure requirements for financial instruments. It aims to enable users to understand the significance of financial instruments for an entity's financial position and performance, as well as the nature and extent of risks arising from financial instruments. Key disclosure requirements include information on classes of financial assets and liabilities, fair value measurements, credit risk, liquidity risk, market risk, and hedge accounting. The standard requires both qualitative and quantitative disclosures to provide a comprehensive picture of an entity's exposure to various risks from its use of financial instruments.
International Accounting Standard (IAS-16) Property, Plant & EquipmentMoeez Hassan
Property Plant & Equipment are tangible assets held for use in production or supply of goods and services for more than one period. The document discusses the initial recognition and measurement of PPE, depreciation methods, revaluation, impairment, and disclosure requirements under IAS 16. Key points include how to determine the cost of PPE, calculate depreciation using methods like straight-line and reducing balance, assess impairment, account for revaluations, and financial statement disclosure requirements.
The document summarizes the key principles of IFRS 8 Operating Segments. It discusses how an entity is required to disclose segment information to enable users to evaluate the nature and financial effects of its business activities and economic environment. It outlines how operating segments and reportable segments are determined, including aggregation criteria and quantitative thresholds. It also describes the various disclosure requirements under IFRS 8 relating to general segment information, revenues, profits/losses, assets/liabilities, and reconciliation of segment information to entity-wide amounts.
A lease is a contractual agreement between a lessor, who owns an asset, and a lessee, who uses the asset. There are two main types of leases from an accounting perspective: operating leases and capital leases. For operating leases, the asset is not recorded on the lessee's balance sheet, while lease payments are expensed over time. For capital leases, the asset and liability are recorded on the lessee's balance sheet similar to a purchased asset. Leases allow companies to acquire assets without large upfront cash outlays and provide off-balance sheet financing advantages.
This document provides an overview of IFRS 11 - Joint Arrangements and Associates. It defines joint arrangements as arrangements where two or more parties have joint control based on a contractual agreement. Joint arrangements are classified as either a joint operation or a joint venture depending on the parties' rights and obligations. For a joint operation, parties account for their share of assets, liabilities, revenue and expenses. For a joint venture, parties account for their interest as an investment using the equity method. Examples of each type of arrangement are also provided.
IAS 16 provides guidance on accounting for property, plant and equipment. It requires initial recognition of assets at cost and subsequent measurement using either the cost model or revaluation model. It also provides guidance on depreciation, derecognition, and disclosures of property, plant and equipment. Some key differences from Indian GAAP include requirements for regular revaluation, a component approach for depreciation, and capitalization of certain subsequent expenditures.
This document summarizes the key impacts of IFRS 16, the new lease accounting standard. It notes that IFRS 16 will require most leases to be brought onto companies' balance sheets, increasing reported assets and liabilities. This will significantly impact lessees' financial statements by increasing assets and liabilities. It will also affect reported metrics like gearing, EBITDA, and interest coverage ratios. The new standard provides a revised definition of a lease and new guidance for measuring lease liabilities. It allows for certain transition options but seeks to improve transparency around companies' lease obligations.
Share-based payments refer to contracts where goods or services are received in exchange for equity instruments or cash based on equity values. Equity instruments include shares or options of the reporting entity, its parent, or subsidiaries. Ind AS 102 applies to share-based payment transactions, except those with shareholders or involving the acquisition of a business. Share-based payments can be settled via equity instruments or cash. Recognition involves recording an expense over the vesting period based on the fair value of instruments on the grant date. Disclosures are required to understand the nature and extent of share-based payment arrangements.
IFRS 16, issued in January 2016, changes lease accounting requirements for lessees. It requires all leases to be reported on the balance sheet as a right-of-use asset and corresponding lease liability. Previously, operating leases were reported off-balance sheet. The new standard aims to provide a more faithful representation of a company's financial position by bringing operating leases onto the balance sheet. For lessees, IFRS 16 eliminates the classification of leases as either operating or finance leases and requires lessees to recognize a right-of-use asset and a financial liability for all leases unless the lease term is 12 months or less or the underlying asset is of low value. Exemptions
The document defines key terms related to leases under IFRS 16, including lease, underlying asset, right-of-use asset, interest rate implicit in the lease, lessee's incremental borrowing rate, unguaranteed residual value, variable lease payments, lease term, short-term lease, and lease incentives. It provides details on lease accounting for both lessees and lessors under IFRS 16 and IAS 17. Specifically, it outlines that under IFRS 16, lessees will recognize a right-of-use asset and lease liability for most leases, while lessors classify leases as either operating or finance leases using similar criteria as under IAS 17. Exemptions
IFRS 16 requires lessees to recognize most leases on their balance sheets. It establishes a single lessee accounting model, requiring lessees to recognize a right-of-use asset and lease liability for all leases, with exemptions for short-term leases and leases of low value assets. For lessors, accounting remains similar to the current standard IAS 17. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted. The new standard will significantly change lessee accounting and financial reporting and may impact many entities across various industries.
This document provides an overview of IAS 23 Borrowing Costs. It discusses the core principle that borrowing costs directly attributable to qualifying assets form part of the cost of that asset. Qualifying assets are those that take a substantial period of time to get ready for use or sale, such as inventories, plants, and properties. Borrowing costs can be capitalized when probable future benefits exist and costs can be reliably measured. The document also outlines the recognition, eligibility, commencement, suspension, and cessation of capitalization of borrowing costs, as well as required disclosures.
This document provides an overview of International Accounting Standard IAS 12 on income taxes. It defines key terms like accounting profit, taxable profit, current tax and deferred tax. It explains how to recognize current tax liabilities and assets, and the treatment of tax losses carried back. Deferred tax arises from temporary differences between the carrying amount of assets/liabilities and their tax base. These can be taxable or deductible temporary differences. Deferred tax is measured using the balance sheet approach by comparing carrying amounts to tax bases.
IFRS 16 introduces significant changes to lease accounting that will primarily affect the accounting treatment of operating leases which were previously off-balance sheet. The new standard requires lessees to recognize a right-of-use asset and lease liability for all leases with a term of more than 12 months, unless the underlying asset is low value. It introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset is of low value. Lessor accounting remains substantially unchanged from IAS 17. The document provides an overview of the key changes and accounting requirements under IFRS 16.
The document outlines Accounting Standard 19 on leases. It discusses the scope, objectives and classification of leases as either finance leases or operating leases. Finance leases transfer substantially all risks and rewards of ownership to the lessee. It provides examples of finance leases and indicators. It also discusses accounting treatment, disclosures and illustrations for lessors and lessees for both finance and operating leases.
IFRS 15 Revenue from contracts with customers Nadir Malik
IFRS 15 Revenue from contracts with customers
Overview of new Standard
Back ground of revenue recognition standard
5 step Model
Contract Cost
Specific guidance
Transition
Presentation and Disclosure
Impacts, challenges and issues
Q&A discussion
The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a The information being shared in this session is not a legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the legal consultation. Any opinion expressed by the presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be presenter is that individual’s view and may not be referred to the ICAPreferred to the ICAPreferred to the ICAPreferred to the ICAP referred to the ICAP referred to the ICAPreferred to the ICAP referred to the ICAP
The document discusses IFRS 2, which provides guidance on accounting for share-based payment transactions. It summarizes key aspects of IFRS 2 including scope, valuation techniques, vesting conditions, journal entries, tax treatment, transition, and disclosure requirements. Valuation of share options requires estimation and the use of models, with complexity depending on factors like performance conditions. An expense is recognized over the vesting period and adjustments made if fair value estimates change.
This standard provides guidance on disclosure requirements for financial instruments. It aims to enable users to understand the significance of financial instruments for an entity's financial position and performance, as well as the nature and extent of risks arising from financial instruments. Key disclosure requirements include information on classes of financial assets and liabilities, fair value measurements, credit risk, liquidity risk, market risk, and hedge accounting. The standard requires both qualitative and quantitative disclosures to provide a comprehensive picture of an entity's exposure to various risks from its use of financial instruments.
International Accounting Standard (IAS-16) Property, Plant & EquipmentMoeez Hassan
Property Plant & Equipment are tangible assets held for use in production or supply of goods and services for more than one period. The document discusses the initial recognition and measurement of PPE, depreciation methods, revaluation, impairment, and disclosure requirements under IAS 16. Key points include how to determine the cost of PPE, calculate depreciation using methods like straight-line and reducing balance, assess impairment, account for revaluations, and financial statement disclosure requirements.
The document summarizes the key principles of IFRS 8 Operating Segments. It discusses how an entity is required to disclose segment information to enable users to evaluate the nature and financial effects of its business activities and economic environment. It outlines how operating segments and reportable segments are determined, including aggregation criteria and quantitative thresholds. It also describes the various disclosure requirements under IFRS 8 relating to general segment information, revenues, profits/losses, assets/liabilities, and reconciliation of segment information to entity-wide amounts.
A lease is a contractual agreement between a lessor, who owns an asset, and a lessee, who uses the asset. There are two main types of leases from an accounting perspective: operating leases and capital leases. For operating leases, the asset is not recorded on the lessee's balance sheet, while lease payments are expensed over time. For capital leases, the asset and liability are recorded on the lessee's balance sheet similar to a purchased asset. Leases allow companies to acquire assets without large upfront cash outlays and provide off-balance sheet financing advantages.
This document provides an overview of IFRS 11 - Joint Arrangements and Associates. It defines joint arrangements as arrangements where two or more parties have joint control based on a contractual agreement. Joint arrangements are classified as either a joint operation or a joint venture depending on the parties' rights and obligations. For a joint operation, parties account for their share of assets, liabilities, revenue and expenses. For a joint venture, parties account for their interest as an investment using the equity method. Examples of each type of arrangement are also provided.
IAS 16 provides guidance on accounting for property, plant and equipment. It requires initial recognition of assets at cost and subsequent measurement using either the cost model or revaluation model. It also provides guidance on depreciation, derecognition, and disclosures of property, plant and equipment. Some key differences from Indian GAAP include requirements for regular revaluation, a component approach for depreciation, and capitalization of certain subsequent expenditures.
This document summarizes the key impacts of IFRS 16, the new lease accounting standard. It notes that IFRS 16 will require most leases to be brought onto companies' balance sheets, increasing reported assets and liabilities. This will significantly impact lessees' financial statements by increasing assets and liabilities. It will also affect reported metrics like gearing, EBITDA, and interest coverage ratios. The new standard provides a revised definition of a lease and new guidance for measuring lease liabilities. It allows for certain transition options but seeks to improve transparency around companies' lease obligations.
Share-based payments refer to contracts where goods or services are received in exchange for equity instruments or cash based on equity values. Equity instruments include shares or options of the reporting entity, its parent, or subsidiaries. Ind AS 102 applies to share-based payment transactions, except those with shareholders or involving the acquisition of a business. Share-based payments can be settled via equity instruments or cash. Recognition involves recording an expense over the vesting period based on the fair value of instruments on the grant date. Disclosures are required to understand the nature and extent of share-based payment arrangements.
IFRS 16, issued in January 2016, changes lease accounting requirements for lessees. It requires all leases to be reported on the balance sheet as a right-of-use asset and corresponding lease liability. Previously, operating leases were reported off-balance sheet. The new standard aims to provide a more faithful representation of a company's financial position by bringing operating leases onto the balance sheet. For lessees, IFRS 16 eliminates the classification of leases as either operating or finance leases and requires lessees to recognize a right-of-use asset and a financial liability for all leases unless the lease term is 12 months or less or the underlying asset is of low value. Exemptions
The document defines key terms related to leases under IFRS 16, including lease, underlying asset, right-of-use asset, interest rate implicit in the lease, lessee's incremental borrowing rate, unguaranteed residual value, variable lease payments, lease term, short-term lease, and lease incentives. It provides details on lease accounting for both lessees and lessors under IFRS 16 and IAS 17. Specifically, it outlines that under IFRS 16, lessees will recognize a right-of-use asset and lease liability for most leases, while lessors classify leases as either operating or finance leases using similar criteria as under IAS 17. Exemptions
IND AS 116 replaces the accounting standard for leases, IND AS 17. Under IND AS 116, lessees will recognize most leases on their balance sheets as lease liabilities, with corresponding right-of-use assets. For lessors, the accounting stays almost the same. The standard provides some exemptions for short-term leases and leases of low-value items. The new standard will result in lessees reporting higher assets and liabilities. It will also affect financial ratios and may lower earnings before interest, taxes, depreciation and amortization (EBITDA).
IND AS 116 replaces the accounting standard for leases, IND AS 17. Under IND AS 116, lessees will recognize most leases on their balance sheets as lease liabilities, with corresponding right-of-use assets. For lessors, the accounting stays almost the same. The standard provides some exemptions for short-term leases and leases of low-value items. The new standard will result in lessees reporting many more assets and liabilities, which will impact key financial metrics. It aims to bring transparency to companies' assets and liabilities arising from lease contracts.
UPDATES ON IFRS 16 LEASES FOR 2013 GROUP.pptKooDwomoh
This document provides an overview of IFRS 16 Leases, which replaced IAS 17 Leases and related interpretations. Key points include:
- IFRS 16 aims to ensure leases are recognized on balance sheets by requiring lessees to recognize assets and liabilities for most leases.
- It establishes a single lessee accounting model, requiring lessees to recognize right-of-use assets and lease liabilities for all leases, unless they qualify for certain recognition exemptions.
- For lessors, IFRS 16 retains the finance and operating lease classifications under IAS 17, with different accounting depending on the classification.
The document discusses accounting for leases according to IAS 17. It defines a lease as an agreement where a lessor conveys to a lessee the right to use an asset for an agreed period of time in return for payments. Leases are classified as either finance leases or operating leases. For finance leases, substantially all risks and rewards of ownership are transferred, while operating leases do not transfer substantially all risks and rewards. The document provides examples of accounting entries for lessees and lessors for both finance and operating leases.
This document summarizes the key aspects of Accounting Standard (AS) 19 regarding the accounting treatment of leases. It defines leases and the different types of leases - operating and finance leases. For finance leases, it outlines that the asset and liability should be recorded on the lessee's balance sheet. For operating leases, the lease payments should be recorded as expenses. It also discusses the accounting treatment for sale and leaseback transactions, required disclosures for lessees and lessors, and the differences between AS 19 and IND AS 17 regarding leases.
IND AS 116 establishes new principles for the recognition, measurement, presentation and disclosure of leases. It introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. The standard also contains revised requirements for lessor accounting. The key changes introduced by IND AS 116 include bringing most operating leases onto a lessee's statement of financial position in a similar way to finance leases, enhancing the required disclosures to help users better understand the amount, timing and uncertainty of cash flows arising from leases, and aligning lease accounting according to the underlying right of use asset.
The document provides an overview of Indian Accounting Standard 116 on lease accounting. Some key points:
1. Ind AS 116 replaces the dual classification model under Ind AS 17 and requires most leases to be recognized on the balance sheet by lessees. It aims to provide more transparent representation of leasing activities.
2. The standard applies to all leases with certain exceptions such as leases of biological assets, service concession arrangements, and licenses of intellectual property.
3. Lessees can elect to not apply the recognition requirements to short-term leases (under 12 months) and leases of low-value assets.
4. The standard defines a lease as a contract that conveys
Dear members,
We would like to thank everybody for joining us on our last seminar which was held last Oct 15,2018 about " The Updates on IFRS 16 "
For Those who was not able to join us, Please have a look over the presentation.
Big Thanks to Mr. Paul Raftery - SVP Platform Finance Healthcare for Mubadala- who was the main speaker.
Dear members,
We would like to thank everybody for joining us on our last seminar which was held last Oct 15,2018 about " The Updates on IFRS 16 "
For Those who was not able to join us, Please have a look over the presentation.
Big Thanks to Mr. Paul Raftery - SVP Platform Finance Healthcare for Mubadala- who was the main speaker.
IFRS 16 replaces IAS 17 and changes the accounting treatment of leases for lessees. It introduces a single lessee accounting model, requiring lessees to recognize assets and liabilities for leases over 12 months. For all applicable leases, lessees must recognize a right-of-use asset and a corresponding lease liability, initially measured at present value of unpaid lease payments. The new standard aims to provide a more faithful representation of leasing activities and improve comparability.
The document discusses the new IFRS 16 leases standard which will significantly change lease accounting for lessees. It will require lessees to recognize nearly all leases on the balance sheet as a right-of-use asset and a lease liability. This will increase reported assets and liabilities for lessees and affect key financial metrics. The standard also provides guidance on separating lease and non-lease components of contracts and determining the lease term. Lessors' accounting remains largely unchanged but they may see impacts due to changes in lessee needs and behaviors. Companies need to assess the impact on financial reporting and business processes to prepare for implementation in 2019.
This document provides an overview of leasing and hire purchase. It defines leasing as a contract where the lessor gives the lessee the right to use an asset for an agreed period in exchange for lease rentals. The key advantages of leasing are saving capital, flexibility, cash flow planning and improved liquidity, while disadvantages include commitment to the contract period and higher fixed costs. Hire purchase allows a purchaser to pay for goods in installments over time, with ownership transferring once fully paid. The document also discusses various lease and hire purchase terms, the history of leasing in India, accounting treatment and myths about leasing.
Accounting and Financial Reporting – Current Developments .docxnettletondevon
Accounting and Financial Reporting – Current Developments
156
I. Changes Coming To Lease Accounting
The FASB's lease accounting project has nine lives and has survived two exposure drafts while
headed toward final passage. As of early 2015, the FASB is putting the finishing touches on a
new lease standard that, when passed, will make dramatic changes to the way companies
account for lease transactions. In particular, most leases will be capitalized, resulting in billions
of dollars of assets and liabilities being recorded on company balance sheets.
Although the lease accounting project has gone through numerous changes, the fundamental
concept that leases be capitalized is not going to change in the final document.
In this section, the author discusses the general concepts that are included in the most recent
lease exposure draft, with modifications that have been proposed by the FASB through their
ongoing deliberations.
Background
Under current GAAP, ASC 840, Leases (formerly FASB No. 13), divides leases into two
categories: operating and capital leases. Capital leases are capitalized while operating leases
are not. In order for a lease to qualify as a capital lease, one of four criteria must be met:
1. The present value of the minimum lease payments must equal or exceed 90% or more of
the fair value of the asset.
2. The lease term must be at least 75% of the remaining useful life of the leased asset.
3. There is a bargain purchase at the end of the lease.
4. There is a transfer of ownership.
In practice, it is common for lessees to structure leases to ensure they do not qualify as capital
leases, thereby removing both the leased asset and obligation from the lessee’s balance sheet.
This approach is typically used by restaurants, retailers, and other multiple-store facilities.
Consider the following example:
Facts:
Lease 1: The present value of minimum lease payments is 89% and the lease term is 74% of
the remaining useful life of the asset.
Lease 2: The present value of minimum lease payments is 90% or the lease term is 75% of the
remaining useful life of the asset.
Accounting and Financial Reporting – Current Developments
157
Conclusion: There is a one percent difference between Lease 1 and Lease 2. Lease 1 is an
operating lease not capitalized, while Lease 2 is a capital lease under which both the asset and
lease obligation are capitalized.
SEC pushes toward changes in lease accounting
In its report entitled Report and Recommendations Pursuant to Section 401(c.) of the
Sarbanes-Oxley Act of 2002 On Arrangements with Off-Balance Sheet Implications, Special
Purpose Entities, and Transparency of Filings by Issuer, the SEC targeted lease accounting as
one of the areas that results in significant liabilities being off-balance sheet.
According to the SEC Report that focused on U.S. public companies and a U.S. Chamber of
Commerce report:
a. 63 .
This document provides an introduction to corporate finance leasing. It begins with learning objectives which are to understand the basic characteristics and accounting treatment of operating and financial leases, as well as how to evaluate lease decisions. Key terms like operating lease, financial lease, and sale-leaseback agreement are introduced. The major types of leasing arrangements - operating leases, financial leases, conditional sales agreements, and sale-leaseback agreements - are then defined and distinguished. The document concludes by explaining how to evaluate the decision to lease versus buy by comparing the cash flow implications of each option.
This document summarizes key aspects of Accounting Standard 19 (AS-19) related to accounting for leases in India. It discusses the differences between finance and operating leases, and the accounting treatment for lessors and lessees under each. It also covers sale and leaseback transactions, tax implications, and disclosure requirements as per AS-19.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
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Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
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Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
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Concluding remarks
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Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
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Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
1. IFRS 16 LEASES
Learning objectives
• Development of IFRS 16
• Objectives and scope of IFRS 16
• What is a lease?
• Does the arrangement contains a lease?
• Lease accounting both lessee and lessor perspective
• Sale and leaseback
• Examples for better understanding….
1 Rakesh Sharma FCCA
2. IFRS 16 LEASES
Development of IFRS 16
IAS 17 was originally issued in 1982 and it was the first standard that applied the concept of substance over form and PV basis of measurement
(discounting techniques etc). In 2016 IASB issued new IFRS 16, almost after a 9 year of replacement project.
1982: IAS 17 originally issued
Substance over form PV (discounting techniques)
2016: IFRS 16 issued by IASB
2 Rakesh Sharma FCCA
3. IFRS 16 LEASES
Development of IFRS 16
Main change in IFRS 16 is that it makes no distinction b/w Operating and Finance Lease for lessees.
Instead, lessee will recognise an asset that is in fact is right to use the leased asset for the lease term and also the liability to make the lease payment.
Both Lessor and lessee will show the leases differently in the financial statements.
Operating v Finance lease Concept or Right to use Different reporting in FS’s
w.e.f. 01 January 2019
IAS 17 Leases will no longer apply
Early application only if IFRS 15 applied within the organisation
2016: New standard IFRS 16
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4. IFRS 16 LEASES
Objectives and scope of IFRS 16
Objective is to specify the principles for recognition, measurement, presentation and disclosure of LEASES.
In other words, The objective is to prescribe accounting treatment for PPE so that users of the FSs can discern information about an entity’s investment in
its PPE and changes in such investment.
Scope: IFRS 16 applies to all leases except for:
Leases to explore for / use of minerals, oil, natural gas and similar
Leases of biological assets (IAS 41)
Intellectual property licenses (IFRS 15)
Service concession arrangements (IFRIC 12)
Rights under licensing agreements (IAS 38)
4 Rakesh Sharma FCCA
5. IFRS 16 LEASES
What is a lease?
A contract, or part of contract, that conveys the right to use an asset for a period of time in exchange for consideration.
Period of time = LEASE TERM
In exchange for consideration =LEASE PAYMENT
Asset
Contract Lessor Lessee
Consideration
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6. IFRS 16 LEASES
What is a lease?
We should assess the existence of lease at the inception of the contract!!
In most arrangements it is very straightforward and easy.
In some arrangements it is not such easy and judgement might be necessary to assess.
So, how can we determine that an arrangement contains a lease??????
Well, arrangement contains a lease if throughout the period of use, the customer has both of the rights
to the identified asset:
The right to obtain substantially all of the Economic Benefits from the use
of identified asset. E.g.,
1.Exclusive right of use,
2. When the customer has the right to get not only primary output of the
asset use but also by-product
The right to direct the use of identified asset. It means the customer
make decisions about why and how the asset is used!
There can be some restrictions e.g., Protective rights do not limit the right
to direct the use
6 Rakesh Sharma FCCA
7. IFRS 16 LEASES
Example: (Protective rights do not limit the right to direct the use)
If you rent a car and you can use it only within certain territory and not in other places, that is the protective right!! But you can still decide why and how to use the car but may be the most
important is to determine the identified asset because if there is no identified asset then there is no lease!!!
In most cases it is easy as asset is identified Explicitly (e.g., car, it specified brand, color, number plate, engine number etc.)
Asset can be identified Implicitly too (when explicit specification is not possible at the inception). (e.g., asset hasn’t built yet). Very often the customer can lease certain capacity of an asset and in
this case Capacity portion can be identified as identified asset if :
• When capacity is physical distinct.
Example- You want to rent storage space in warehouse and if your contract specifies the Specific unit/ area you will be renting out and no one else can use that area then your contract contains a
LEASE. But, if your contract specifies the area e.g., 100 sq. meter of the warehouse and the warehouse manager can re-arrange the space and offer any 100 sq. meter in the warehouse, then contract
doesn’t contain a LEASE (as no identified asset)
• Sometimes, capacity portion is not physically distinct but, still an identified asset. Its when you substantially all of the capacity of the asset. For example, you want use of pipeline to transfer
gas or oil. You entre into the contract for right to use of 90% of the pipeline capacity over the contract term. Though capacity is not physically distinct but 90% is almost all of pipeline
capacity and this is considered as identified asset under IFRS 16. But, if you rent out just 50% then it wont be classified as an identified asset (as not physically distinct and not substantially all
of the asset) and hence not considered as LEASE.
7 Rakesh Sharma FCCA
8. IFRS 16 LEASES
No Classification b/w Operating and Finance leases (i.e., account for all the leases in the same way)
Initial Recognition
Lessee recognises both
• Amount of lease liability, Lease payments not paid at commencement date
• Lease payments made before or on discounted to PV using the
Commencement date – lease incentives received, if any interest rate implicit in LEASE
• Initial direct cost incurred by lessee, Note: if the rate implicit in the lease can’t be determined the lessee shall
• Estimated cost of dismantling asset use their incremental borrowing rate.
Leaes Accounting ; Lessee Perspective
At the Commencement date
Right of use Asset Lease Liability
8 Rakesh Sharma FCCA
9. IFRS 16 LEASES
No Classification b/w Operating and Finance leases (i.e., account for all the leases in the same way)
Lessee recognises both
Exceptions (0ptional): choose whether you like to apply IFRS 16 to below optional exemptions
1.. Lease term < 1 year with no purchase option
2. Underlying asset of low value when new, such as PC (and done on one by one basis)
The accounting for low value or short-term leases is done through expensing the rental through profit or loss on a straight-line basis.
Leaes Accounting ; Lessee Perspective
At the Commencement date
Right of use Asset Lease Liability
9 Rakesh Sharma FCCA
10. IFRS 16 LEASES
Subsequent measurement - After commencement date, lessee needs to take care about both elements recognized initially:
Normally, a lessee needs to measure the right-of-use asset using a cost model under IAS 16.. It basically means to depreciate the asset over the lease term: (Cost less Accumulated
depreciation)
Dr P/L (Dep’n Charge) Cr Acc Dep’n of Right of use asset
A lessee needs to recognize an interest on the lease liability, Also, the lease payments are recognized as a reduction of the lease liability. If there is a change in the lease term, lease payments,
discount rate or anything else, then the lease liability must be re-measured to reflect all the changes. (Financial liability at amortised cost)
Dr P/L (Int expense) Cr Lease Liability => Recognition of interest on Lease liability
Dr Lease liability Cr Bank/ Cash => Payment of lease
Leaes Accounting ; Lessee Perspective
1. Right of use Asset
2.Lease Liability
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11. IFRS 16 LEASES
Example 1: On 1 January 2019, Plum entered into a five year lease of machinery. The machinery has a useful life of six years. The annual lease payments are $5,000 per annum, with the first
payment made on 1 January 2019. To obtain the lease Plum incurs initial direct costs of $1,000 in relation to the arrangement of the lease but the lessor agrees to reimburse Pear $500 towards the
costs of the lease. The rate implicit in the lease is 5%. The present value of the minimum lease payments is $22,730. Demonstrate how the lease will be accounted in the financial statements over the
five year period.
• Lessee takes asset under the lease: Dr Right of use Asset Cr Lease liability => $22.,730
• Lessee pays the legal fees Dr Right of use Asset Cr Suppliers / Bank / Cash =>$1,000 (i.e., initial direct cost)
• Incentive payments received Dr Cash Cr Right of use asset => $500
• Lessee remove an asset/ restore the site after the end of the lease term
Dr Right of use Asset Cr Provision of asset removal (IAS 37) =>N/A
Right of use asset = $22,,730 + $1,000 - $500 = $23,230
Leaes Accounting ; Lessee Perspective
Initial recognition
11 Rakesh Sharma FCCA
12. IFRS 16 LEASES
Example 1: On 1 January 2019, Plum entered into a five year lease of machinery. The machinery has a useful life of six years. The annual lease payments are $5,000 per annum, with the first
payment made on 1 January 2019. To obtain the lease Plum incurs initial direct costs of $1,000 in relation to the arrangement of the lease but the lessor agrees to reimburse Pear $500 towards the
costs of the lease. The rate implicit in the lease is 5%. The present value of the minimum lease payments is $22,730. Demonstrate how the lease will be accounted in the financial statements over the
five year period.
• Depreciate the asset over the earlier lease term of 5 years.
• Expense per annum = $22,230 / 5 = $4,646
• Record fin lease payments and interest using the rate implicit in the lease
Leaes Accounting ; Lessee Perspective
Subsequent measurement
12 Rakesh Sharma FCCA
13. IFRS 16 LEASES
I. FINANCE LEAES
Initial Recognition
At the commencement of lease term – lessor should recognise LEASE RECEIVABLES ( = Net Investment in LEASE)
Net investment in lease equals to the PV of payments not paid at the commencement date…plus initial direct costs
Journal will be as: Dr Lease Receivables Cr PPE (underlying asset)
Subsequent Measurement
1. Recognition of finance income on Lease Receivables Dr Lease Receivables Cr P/L – Finance income
2. Cash received and reduction in lease receivables Dr Bank/ Cash Cr Lease Receivables
II. OPERATING LEASE
• Lessor keeps recognising the leased asset in his FS’s
• Lease income from OL recognised as an income on SL basis (or another systematic basis) over the lease term
Leaes Accounting ; Lessors Perspective
13 Rakesh Sharma FCCA
14. IFRS 16 LEASES
A sale and leaseback transaction occurs when one entity (seller) transfers an asset to another entity (buyer) who then leases the asset back to the original seller (lessee).
In this situation a seller becomes lessee and a buyer becomes a lessor
Accounting treatment of sale and leaseback transactions depends on the whether the transfer of an asset is a sale under IFRS 15 Revenue from contracts with customers.
If transfer is not a sale:
• Seller (lessee) : 1. continue to recognize the asset
2. account for cash received as for a financial liability (under IFRS 9 Financial Instruments)
• Buyer (lessor): 1. don’t recognize the asset
2. recognizes the financial asset (= proceeds) (under IFRS 9 Financial instruments)
Sale and Leaseback
14 Rakesh Sharma FCCA
15. IFRS 16 LEASES
If transfer is a sale:
• Seller (lessee) : 1. derecognise the asset, recognize the sale at Fair value
2. recognise the lease liability (PV of lease rentals)
3. recognise a right-of-use asset, as a prop. of the previous carrying value of underlying asset
4. Gain/loss on rights transferred to the buyer
• Buyer (lessor): 1. recognise purchase of the asset
2. Apply lessor accounting
Sale and Leaseback
15 Rakesh Sharma FCCA
16. IFRS 16 LEASES
Example 1 : Apple required funds to finance a new ambitious rebranding exercise. It’s only possible way of raising finance is through the sale and
leaseback of its head office building for a period of 10 years. The lease payments of $1 million are to be made at the end of the lease period The current
fair value of the building is $10 million and the carrying value is $8.4 million. The interest rate implicit in the lease is 5%. Advise Apple on how to
account for the sale and leaseback in its financial statements if the office building were to be sold at the fair value of $10 million and:
(a) Performance obligations are not satisfied; or,
(b) Performance obligations are satisfied.
Sale and Leaseback
16 Rakesh Sharma FCCA
17. IFRS 16 LEASES
If transfer is not a sale:
• Seller (lessee) : 1. continue to recognize the asset @ $8.4m and depreciate.
2. account for cash received as for a financial liability (under IFRS 9 Financial Instruments) @ transfer proceeds
of $10m
• Buyer (lessor): 1. don’t recognize the asset as it has not been sold to buyer
2. recognizes the financial asset (= proceeds) (under IFRS 9 Financial instruments) @ transfer proceeds of $10m
If transfer is a sale:
• Seller (lessee) : 1. derecognise the asset, recognize the sale at Fair value @ 8.4m
2. recognise the lease liability (PV of lease rentals)
3. recognise a right-of-use asset, as a prop. of the previous carrying value of underlying asset
4. Gain/loss on rights transferred to the buyer @ balancing figure
• Buyer (lessor): 1. recognise purchase of the asset @$10m (FV = proceeds)
2. Apply lessor accounting
Sale and Leaseback
17 Rakesh Sharma FCCA
18. IFRS 16 LEASES
Journal : Dr Bank $10 m
Dr Right of use asset (WN – 2) $6.49 m
Cr Lease liability $7.72 m (WN – 1)
Cr PPE – Building $8.40 m
Cr Gain on transfer $ 0.36 m
Workings Notes
WN – 1: Lease Liability = PV of lease rentals at rate implicit in the lease = $1m X PVF for ordinary annuity for 10 years at 5%
= $1m X 7.722 = $7.722m
WN – 2: Fair Value Carrying Value
Right of use Asset $ 7.722m = 77.22% $8.4mX77.22% = $6.49m
Rights Transferred $ 2.278 m = 22..78% $1.91m
Total $ 10m = 100%
Sale and Leaseback
18 Rakesh Sharma FCCA
19. IFRS 16 LEASES
Thanks for the patience…. Should you have any queries or require any guidance, please comment and shall return the call!
Have a great Year Ahead!!!
19 Rakesh Sharma FCCA