Overview
Indian Accounting Standard (Ind AS) 116 is largely converged with International Financial Reporting Standard (IFRS) 16, both replacing the older lease accounting model that allowed operating leases to remain off-balance sheet. However, while the two standards share the same foundational principles, there are important differences that CFOs of multinational or dual-reporting companies must understand.
For companies listed in India that also report under IFRS for global consolidation, these differences can create reconciliation challenges and potential confusion among stakeholders. This guide breaks down exactly what differs and what stays the same.
Tip: If your company reports under both Ind AS and IFRS, use a lease accounting platform that supports dual-standard compliance to avoid maintaining separate spreadsheets for each framework.
Key Differences Between Ind AS 116 and IFRS 16
| Aspect | Ind AS 116 | IFRS 16 |
|---|---|---|
| Effective date | 1 April 2019 | 1 January 2019 |
| Issuing body | MCA / ICAI (India) | IASB (International) |
| Appendix C — Concession periods | Includes specific guidance on service concession arrangements | Covered under IFRIC 12 separately |
| COVID-19 rent concession expedient | Adopted with slight modification in timeline | Original amendment issued May 2020, extended 2021 |
| Ind AS 101 / IFRS 1 interaction | Specific carve-outs for first-time Ind AS adopters | Standard IFRS 1 transition provisions |
| Currency and jurisdiction | INR functional currency considerations | Multi-currency, global applicability |
| Regulatory filings | MCA XBRL filings, Schedule III format | Varies by jurisdiction |
What Stays the Same
Despite the differences in applicability and regulatory context, the core accounting model is identical:
Shared Accounting Model
Both standards require lessees to:
- Recognise a Right-of-Use (ROU) asset and lease liability for all leases exceeding 12 months and above the low-value threshold
- Depreciate the ROU asset and accrete interest on the lease liability
- Handle four modification scenarios with the same P&L treatment
- Apply the same discount rate hierarchy — implicit rate first, then incremental borrowing rate
- Provide substantially similar disclosure requirements
Which Standard Applies to You?
Determining which standard to follow depends on your reporting obligations:
- Standalone Indian entity — If you are a company incorporated in India that follows Ind AS (based on MCA roadmap criteria), you follow Ind AS 116 for your statutory financials.
- Indian subsidiary of a global parent — Your standalone financials follow Ind AS 116. For group consolidation, you may need to report under IFRS 16 as well. Reconciliation is necessary.
- Multinational with Indian operations — Your Indian operations follow Ind AS 116 locally, but the parent company consolidates under IFRS 16. Differences in effective dates and carve-outs may require adjustments.
- Dual-listed companies — Companies listed both in India and on international exchanges need to comply with both standards simultaneously and disclose differences.
Practical Implications for CFOs
For most Indian enterprises, the differences between Ind AS 116 and IFRS 16 are narrow and manageable. However, they become significant in specific scenarios:
Dual Reporting
If you report under both frameworks, invest in a system that can generate compliant outputs for both Ind AS 116 and IFRS 16 from a single lease data set. Manual dual maintenance is a recipe for errors.
Service Concessions
Companies involved in infrastructure projects or public-private partnerships must carefully evaluate whether their arrangements fall under Ind AS 116 lease guidance or the service concession framework, as the treatment can differ from IFRS.
Rent Concession Expedients
The COVID-19 rent concession practical expedient was adopted differently in India. Review whether your treatment of pandemic-era rent reductions aligns with the specific Ind AS guidance.
Bottom Line: For the vast majority of Indian companies, Ind AS 116 and IFRS 16 produce identical accounting outcomes. Focus your energy on getting the lease data right — the standard differences are secondary.