New accounting norms likely to hit finances of retail companies

IndAS 116 rules will lead to rise in notional assets & liabilities, say companies

IndAS 116, the new accounting standard for leases, which will be visible from the June quarter, may significantly affect the financials of retail companies. This is because firms, which depend on the lease model when setting up stores, will now have to account for it in their balance sheet, something that they did not do when using the previous accounting standard, namely, IndAS 17.
 
Executives from retail firms told Business Standard that this was likely to bloat balance sheets with notional assets and liabilities. “As IndAS 116 requires that a lessee bring all leases into the balance sheet in