Page 197 - FBL AR 2019-20

CORPORATE STATUTORY FINANCIAL
OVERVIEW STATEMENTS STATEMENTS

Notes to the Consolidated financial statements for the year ended March 31, 2020

Extension and termination options are included in many of the leases. In determining the lease term the management considers all facts
and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option.

Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing
cash flows.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing
cash flows.
Effective April 01, 2019, the Group has adopted IND AS 116 “Leases” and applied to lease contracts existing on April 01, 2019, by electing
‘retrospective approach with the cumulative effect at the date of initial application’. The impact of adoption of the standards is not
material on the profit after tax for the year ended March 31, 2020 in the consolidated financial statements.
Also refer Note 43.
In respect of short-term leases and leases of low-value assets, the Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases of real estate properties that have a lease term of 12 months. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis over the lease term.

Accounting under Ind AS 17 “Leases” up to March 31, 2019
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases.
The Group as a lessor:
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases.
Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment
outstanding in respect of the leases.

Rental income from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the
rentals are structured solely to increase in line with expected general inflation to compensate for the Group’s expected inflationary
cost increases, such increases are recognised in the year in which such benefits accrue. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease
term.
The Group as a lessee:
Assets held under finance leases are initially recognised as assets of the group at their fair value at the inception of the lease or, if lower,
at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance
sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly
attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs [see
note 2(h) above]. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Rental expense from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the
rentals are structured solely to increase in line with expected general inflation to compensate for the lessor’s expected inflationary cost
increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are
recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate
benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is
more representative of the time pattern in which economic benefits from the leased asset are consumed.
(t) Provisions, contingent liabilities and contingent assets

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of
the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using

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