Motilal Oswal: Ind AS 116- Lease Accounting Turns Cash Flows Incomparable

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.The implementation of Indian Accounting Standard (Ind-AS) 116 Lease accounting has brought about a significant impact on the reported financials of companies in FY20.This has turned the reported financials incomparable with earlier years. Throughout FY20, investors tried comprehending the impact and adjusted their reported earnings (operating and net) to the changes brought by the new accounting standard in order to understand the impact on business (on like-to-like basis).As companies now disclose year-end cash flow statements, investors are currently finding reported cash flows (within internal heads changed) also incomparable.We note that this is primarily due to lease rental outflows now being excluded from operating activities in cash flows.Instead, lease rental outflows are being recognized under the heads of (a) interest payable toward lease liabilities, and (b) principal repayment of lease liability - in the financing cash flows.Thus, due to the change in accounting system, while overall cash flows of companies have remained unchanged, reported operating cash flows and free cash flow of companies are overstated at the expense of higher outflows in financing activities..Click on the attachment to read the full report:.DISCLAIMERThis report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Motilal Oswal: Ind AS 116- Lease Accounting Turns Cash Flows Incomparable

Motilal Oswal: Ind AS 116- Lease Accounting Turns Cash Flows Incomparable

Choose a plan