ASLB 13 Leases
Accounting Standard for Local Bodies (ASLB) 13
Leases
Contents
Paragraphs
OBJECTIVE 1
SCOPE 2-7
DEFINITIONS 8-11
Changes in Lease Payments between the Inception of
the Lease and the Commencement of the Lease Term 9
Hire Purchase Contracts 10
Incremental Borrowing Rate of Interest 11
CLASSIFICATION OF LEASES 12-24
LEASES AND OTHER CONTRACTS 25-27
LEASES IN THE FINANCIAL STATEMENTS OF LESSEES 28-44
Finance Leases 28-41
Operating Leases 42-44
LEASES IN THE FINANCIAL STATEMENTS OF 45-69
Finance Leases 45-49
Initial Recognition 50-61
Operating Leases 62-69
SALE AND LEASEBACK TRANSACTIONS 70-78
APPENDIX 1 COMPARISON WITH IPSAS 13, ‘LEASES’
APPENDIX 2 COMPARISON WITH EXISTING AS 19, ‘LEASES’
Compendium of Accounting Standards for Local Bodies (ASLBs)
Accounting Standard for Local Bodies (ASLB) 13
Leases
(This Accounting Standard includes paragraphs set in bold italic type and
plain type, which have equal authority, Paragraphs in bold italic type indicate
the main principles. This Accounting Standard should be read in the context
of its objective and the Preface to the Accounting Standards for Local
Bodies1.)
The Accounting Standard for Local Bodies (ASLB) 13, ‗Leases‘ issued by the
Council of the Institute of Chartered Accountants of India, will be
recommendatory in nature in the initial years for use by the local bodies. This
Standard will be mandatory for local bodies in a State from the date specified
in this regard by the State Government concerned2.
The following is the text of the Accounting Standard for Local Bodies (ASLB)
13, ‗Leases‘:
Objective
1. The objective of this Standard is to prescribe, for lessees and lessors,
the appropriate accounting policies and disclosures to apply in relation
to finance and operating leases.
Scope
2. An entity that prepares and presents financial statements under
the accrual basis of accounting should apply this Standard in
accounting for all leases other than:
(a) Leases to explore for or use minerals, oil, natural gas and
similar non-regenerative resources; and
(b) Licensing agreements for such items as motion picture
films, video recordings, plays, manuscripts, patents and
copyrights.
1 Attention is specifically drawn to paragraph 4.2 of the ‘Preface to the Accounting
Standards for Local Bodies’, according to which Accounting Standards are intended to
apply only to items which are material.
2 In respect of compliance with the Accounting Standards for Local Bodies, reference
may be made to the paragraph 7.1 of the ‘Preface to the Accounting Standards for Local
Bodies’.
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Leases
However, this Standard should not be applied as the basis of
measurement for:
(a) [Refer to Appendix-1];
(b) Investment property provided by lessors under operating
leases (see ASLB 16, ‘Investment Property’);
(c) Biological assets held by lessees under finance leases; or
(d) Biological assets provided by lessors under operating
leases.
The criteria of classification of leases as prescribed in the
standard is not to be applied to the leases of the Land or/and
Buildings. All leases of land or/and buildings are to be treated as
operating leases for the purpose of accounting as per this
Standard.
3. This Standard applies to all the entities described as local bodies
in the ‘Preface to Accounting Standards for Local Bodies’3.
4. [Deleted]
5. This Standard applies to agreements that transfer the right to use
assets, even though substantial services by the lessor may be called
for in connection with the operation or maintenance of such assets.
This standard does not apply to agreements that are contracts for
services that do not transfer the right to use assets from one
contracting party to the other. Local Bodies may enter into complex
arrangements for the delivery of services, which may or may not
include leases of assets. These arrangements are discussed in
paragraphs 25 to 27.
6. This Standard does not apply to (a) lease agreements to explore for or
use natural resources such as oil, gas, timber, metals, and other
mineral rights, and (b) licensing agreements for such items as motion
picture films, video recordings, plays, manuscripts, patents and
copyrights. This is because these types of agreements have the
potential to raise complex accounting issues that need to be
addressed separately.
3 Refer paragraph 1.3 of the ‗Preface to the Accounting Standards for Local Bodies‘.
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7. This Standard does not apply to investment property. Investment
properties are measured in accordance with the provisions of ASLB
16.
Definitions
8. The following terms are used in this Standard with the meanings
specified:
The commencement of the lease term is the date from which the
lessee is entitled to exercise its right to use the leased asset. It is
the date of initial recognition of the lease (i.e., the recognition of
the assets, liabilities, revenue, or expenses resulting from the
lease, as appropriate).
Contingent rent is that portion of the lease payments that is not
fixed in amount, but is based on the future amount of a factor that
changes other than the passage of time (e.g., percentage of future
sales, amount of future use, future price indices, future market
rates of interest).
Economic life is either:
(a) The period over which an asset is expected to yield
economic benefits or service potential to one or more
users; or
(b) The number of production or similar units expected to be
obtained from the asset by one or more users.
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in an
arm’s length transaction.
A finance lease is a lease that transfers substantially all the risks
and rewards incidental to ownership of an asset. Title may or may
not eventually be transferred.
Gross investment in the lease is the aggregate of:
(a) The minimum lease payments receivable by the lessor
under a finance lease; and
(b) Any unguaranteed residual value accruing to the lessor.
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Guaranteed residual value is:
(a) For a lessee, that part of the residual value that is
guaranteed by the lessee or by a party related to the lessee
(the amount of the guarantee being the maximum amount
that could, in any event, become payable); and
(b) For a lessor, that part of the residual value that is
guaranteed by the lessee or by a third party unrelated to the
lessor that is financially capable of discharging the
obligations under the guarantee.
The inception of the lease is the earlier of the date of the lease
agreement and the date of commitment by the parties to the
principal provisions of the lease. As at this date:
(a) A lease is classified as either an operating or a finance
lease; and
(b) In the case of a finance lease, the amounts to be
recognised at the commencement of the lease term are
determined.
Initial direct costs are incremental costs that are directly
attributable to negotiating and arranging a lease, except for such
costs incurred by manufacturer or trader lessors.
The interest rate implicit in the lease is the discount rate that, at
the inception of the lease, causes the aggregate present value of:
(a) The minimum lease payments; and
(b) The unguaranteed residual value
to be equal to the sum of (i) the fair value of the leased asset, and
(ii) any initial direct costs of the lessor.
A lease is an agreement whereby the lessor conveys to the
lessee, in return for a payment or series of payments, the right to
use an asset for an agreed period of time.
The lease term is the non-cancelable period for which the lessee
has contracted to lease the asset, together with any further terms
for which the lessee has the option to continue to lease the asset,
with or without further payment, when at the inception of the
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lease it is reasonably certain that the lessee will exercise the
option.
The lessee’s incremental borrowing rate of interest is the rate of
interest the lessee would have to pay on a similar lease or, if that
is not determinable, the rate that, at the inception of the lease, the
lessee would incur to borrow over a similar term, and with a
similar security, the funds necessary to purchase the asset.
Minimum lease payments are the payments over the lease term
that the lessee is, or can be, required to make, excluding
contingent rent, costs for services and, where appropriate, taxes
to be paid by and reimbursed to the lessor, together with:
(a) For a lessee, any amounts guaranteed by the lessee or by a
party related to the lessee; or
(b) For a lessor, any residual value guaranteed to the lessor
by:
(i) The lessee;
(ii) A party related to the lessee; or
(iii) An independent third party unrelated to the lessor
that is financially capable of discharging the
obligations under the guarantee.
However, if the lessee has an option to purchase the asset at a
price that is expected to be sufficiently lower than the fair value at
the date the option becomes exercisable for it to be reasonably
certain, at the inception of the lease, that the option will be
exercised, the minimum lease payments comprise the minimum
payments payable over the lease term to the expected date of
exercise of this purchase option and the payment required to
exercise it.
Net investment in the lease is the gross investment in the lease
discounted at the interest rate implicit in the lease.
A non-cancelable lease is a lease that is cancelable only:
(a) Upon the occurrence of some remote contingency;
(b) With the permission of the lessor;
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(c) If the lessee enters into a new lease for the same or an
equivalent asset with the same lessor; or
(d) Upon payment by the lessee of such an additional amount
that, at inception of the lease, continuation of the lease is
reasonably certain.
An operating lease is a lease other than a finance lease.
Unearned finance revenue is the difference between:
(a) The gross investment in the lease; and
(b) The net investment in the lease.
Unguaranteed residual value is that portion of the residual value
of the leased asset, the realisation of which by the lessor is not
assured or is guaranteed solely by a party related to the lessor.
Useful life is the estimated remaining period, from the
commencement of the lease term, without limitation by the lease
term, over which the economic benefits or service potential
embodied in the asset are expected to be consumed by the entity.
Terms defined in other Accounting Standards for Local Bodies
(ASLBs) are used in this Standard with the same meaning as in
those other Standards.
Changes in Lease Payments between the Inception of
the Lease and the Commencement of the Lease Term
9. A lease agreement or commitment may include a provision to adjust
the lease payments (a) for changes in the construction or acquisition
cost of the leased property, or (b) for changes in some other measure
of cost or value, such as general price levels, or in the lessor‘s costs of
financing the lease, during the period between the inception of the
lease and the commencement of the lease term. If so, the effect of any
such changes should be deemed to have taken place at the inception
of the lease for the purposes of this Standard.
Hire Purchase Contracts
10. The definition of a lease includes contracts for the hire of an asset that
contain a provision giving the hirer an option to acquire title to the
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asset upon the fulfillment of agreed conditions. These contracts are
sometimes known as hire purchase contracts.
Incremental Borrowing Rate of Interest
11. Where an entity has borrowings that are guaranteed by the
government, the determination of the lessee‘s incremental borrowing
rate of interest reflects the existence of any government guarantee
and any related fees. This will normally lead to the use of a lower
incremental borrowing rate of interest.
Classification of Leases 4
12. The classification of leases adopted in this Standard is based on the
extent to which risks and rewards incidental to ownership of a leased
asset lie with the lessor or the lessee. Risks include the possibilities of
(a) losses from idle capacity, technological obsolescence, or (b)
changes in value because of changing economic conditions. Rewards
may be represented by the expectation of service potential or
profitable operation over the asset‘s economic life, and of gain from
appreciation in value or realisation of a residual value.
13. A lease is classified as a finance lease if it transfers substantially
all the risks and rewards incidental to ownership. A lease is
classified as an operating lease if it does not transfer
substantially all the risks and rewards incidental to ownership.
14. Because the transaction between a lessor and a lessee is based on a
lease agreement between them, it is appropriate to use consistent
definitions. The application of these definitions to the differing
circumstances of the lessor and lessee may result in the same lease
being classified differently by them. For example, this may be the case
if the lessor benefits from a residual value guarantee provided by a
party unrelated to the lessee.
15. Whether a lease is a finance lease or an operating lease depends on
the substance of the transaction rather than the form of the contract.
Although the following are examples of situations that individually or in
4 Paragraphs 12 to 18 relating to classification of leases are not applicable to leases of
Land or/ and Building as all leases of land or/ and building are to be classified as
operating leases.
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combination would normally lead to a lease being classified as a
finance lease, a lease does not need to meet all these criteria in order
to be classified as a finance lease:
(a) The lease transfers ownership of the asset to the lessee by the
end of the lease term;
(b) The lessee has the option to purchase the asset at a price that
is expected to be sufficiently lower than the fair value at the
date the option becomes exercisable for it to be reasonably
certain, at the inception of the lease, that the option will be
exercised;
(c) The lease term is for the major part of the economic life of the
asset even if title is not transferred;
(d) At the inception of the lease the present value of the minimum
lease payments amounts to at least substantially all of the fair
value of the leased asset;
(e) The leased assets are of such a specialised nature that only the
lessee can use them without major modifications; and
(f) The leased assets cannot easily be replaced by another asset.
16. Other indicators that individually or in combination could also lead to a
lease being classified as a finance lease are:
(a) If the lessee can cancel the lease, the lessor‘s losses
associated with the cancellation are borne by the lessee;
(b) Gains or losses from the fluctuation in the fair value of the
residual accrue to the lessee (for example in the form of a rent
rebate equaling most of the sales proceeds at the end of the
lease); and
(c) The lessee has the ability to continue the lease for a secondary
period at a rent that is substantially lower than market rent.
17. The examples and indicators in paragraphs 15 and 16 are not always
conclusive. If it is clear from other features that the lease does not
transfer substantially all risks and rewards incidental to ownership, the
lease is classified as an operating lease. For example, this may be the
case (a) if ownership of the asset transfers at the end of the lease for
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Compendium of Accounting Standards for Local Bodies (ASLBs)
a variable payment equal to its then fair value, or (b) if there are
contingent rents as a result of which the lessee does not have
substantially all such risks and rewards.
18. Lease classification is made at the inception of the lease. If at any time
the lessee and the lessor agree to change the provisions of the lease,
other than by renewing the lease, in a manner that would have
resulted in a different classification of the lease under the criteria in
paragraphs 12 - 17 if the changed terms had been in effect at the
inception of the lease, the revised agreement is regarded as a new
agreement over its term. However, changes in estimates (for example,
changes in estimates of the economic life or the residual value of the
leased property) or changes in circumstances (for example, default by
the lessee), do not give rise to a new classification of a lease for
accounting purposes.
19-20. [Deleted]
20A-24. [Refer to Appendix 1]
Example: (a) The lease term is for the major part of the economic life
of the asset even if title is not transferred;
(b) At the inception of the lease the present value of the minimum
lease payments amounts to at least substantially all of the fair value
of the leased asset
Local Body takes a sewage plant on lease on Jan 1, 20XX. Details
are as under:
Fair value of plant is ₹ 1,00,000/-
Useful life of plant: 6 years
Annual lease payment ₹ 26,380/-
Term of lease: 5 years
Implicit Interest Rate : 12%
Annuity factor (5 years for 12%)=3.604776
Solution:
Present value of minimum lease payment is calculated as follows:
Annual Lease payment*annuity factor
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26,380*3.604776 = 95,094
Analysis:
Criteria (a): the lease has been entered into for 5 years which is the
83% (i.e., for significant part of the useful life of the plant), hence,
criteria (a) above is met.
Criteria (b): when the Present value of minimum lease payment is
substantially all of the fair value of leased asset at the inception of
lease, criteria (b) above is met. In this example, Present value of
minimum lease payment is ₹ . 95,094/- which is almost 95%
(substantially all of the Fair value of the plant).
Leases and Other Contracts
25. A contract may consist solely of an agreement to lease an asset.
However, a lease may also be one element in a broader set of
agreements with private sector entities to construct, own, operate,
and/or transfer assets. Local Bodies often enter into such agreements,
particularly in relation to long-lived physical assets and infrastructure
assets. Other agreements may involve a local body leasing
infrastructure from the private sector. The entity determines whether
the arrangement is a service concession arrangement, as defined in
ASLB 32, ‗Service Concession Arrangements: Grantor’.
26. Where an arrangement does not meet the conditions for recognition of
a service concession asset in accordance with ASLB 32 and the
arrangement contains an identifiable operating lease or finance lease
as defined in this Standard, the provisions of this Standard are applied
in accounting for the lease component of the arrangement.
27. Local Bodies may also enter a variety of agreements for the provision
of goods and/or services, which necessarily involve the use of
dedicated assets. In some of these agreements, it may not be clear
whether a service concession arrangement as defined in ASLB 32 or a
lease, as defined by this Standard, has arisen. In these cases,
professional judgment is exercised, and if a lease has arisen this
standard is applied; if a lease has not arisen, entities account for those
agreements by applying the provisions of other relevant ASLBs.
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Leases in the Financial Statements of Lessees
Finance Leases
28. At the commencement of the lease term, lessees should
recognise assets acquired under finance leases as assets, and
the associated lease obligations as liabilities in their balance
sheet. The assets and liabilities should be recognised at amounts
equal to the fair value of the leased property or, if lower, the
present value of the minimum lease payments, each determined
at the inception of the lease. The discount rate to be used in
calculating the present value of the minimum lease payments is
the interest rate implicit in the lease, if this is practicable to
determine; if not, the lessee’s incremental borrowing rate should
be used.
29. Transactions and other events are accounted for and presented in
accordance with their substance and financial reality, and not merely
with legal form. Although the legal form of a lease agreement is that
the lessee may acquire no legal title to the leased asset, in the case of
finance leases the substance and financial reality are that the lessee
acquires the economic benefits or service potential of the use of the
leased asset for the major part of its economic life in return for
entering into an obligation to pay for that right an amount
approximating, at the inception of the lease, the fair value of the asset
and the related finance charge.
30. If such lease transactions are not reflected in the lessee‘s financial
statements, the assets and liabilities of an entity are understated,
thereby distorting financial ratios. Therefore, it is appropriate for a
finance lease to be recognised in the lessee‘s financial statements
both as an asset and as an obligation to pay future lease payments. At
the commencement of the lease term, the asset and the liability for the
future lease payments are recognised in the financial statements at
the same amounts, except for any initial direct costs of the lessee that
are added to the amount recognised as an asset.
31. It is not appropriate for the liabilities for leased assets to be presented
in the financial statements as a deduction from the leased assets.
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32. If, for the presentation of liabilities on the face of the balance sheet, a
distinction is made between current and non-current liabilities, the
same distinction is made for lease liabilities.
33. Initial direct costs are often incurred in connection with specific leasing
activities, such as negotiating and securing leasing arrangements. The
costs identified as directly attributable to activities performed by the
lessee for a finance lease are added to the amount recognised as an
asset.
34. Minimum lease payments should be apportioned between the
finance charge and the reduction of the outstanding liability. The
finance charge should be allocated to each period during the
lease term so as to produce a constant periodic rate of interest on
the remaining balance of the liability. Contingent rents should be
charged as expenses in the period in which they are incurred.
35. In practice, in allocating the finance charge to periods during the lease
term, a lessee may use some form of approximation to simplify the
calculation.
36. A finance lease gives rise to a depreciation expense for
depreciable assets as well as a finance expense for each
accounting period. The depreciation policy for depreciable leased
assets should be consistent with that for depreciable assets that
are owned, and the depreciation recognised should be calculated
in accordance with ASLB 17, ‘Property, Plant and Equipment’, and
ASLB 31, ‘Intangible Assets’, as appropriate. If there is no
reasonable certainty that the lessee will obtain ownership by the
end of the lease term, the asset should be fully depreciated over
the shorter of the lease term or its useful life.
37. The depreciable amount of a leased asset is allocated to each
accounting period during the period of expected use on a systematic
basis consistent with the depreciation policy the lessee adopts for
depreciable assets that are owned. If there is reasonable certainty that
the lessee will obtain ownership by the end of the lease term, the
period of expected use is the useful life of the asset; otherwise the
asset is depreciated over the shorter of the lease term or its useful life.
38. The sum of the depreciation expense for the asset and the finance
expense for the period is rarely the same as the lease payments
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payable for the period, and it is therefore inappropriate simply to
recognise the lease payments payable as an expense. Accordingly,
the asset and the related liability are unlikely to be equal in amount
after the commencement of the lease term.
39. To determine whether a leased asset has become impaired, an entity
applies relevant impairment tests in accordance with ASLB 21,
‗Impairment of Non-Cash-Generating Assets‘ and ASLB 26,
‗Impairment of Cash-Generating Assets‘.
40. Lessees should disclose the following for finance leases:
(a) For each class of asset, the net carrying amount at the
reporting date;
(b) A reconciliation between the total of future minimum lease
payments at the reporting date, and their present value;
(c) In addition, an entity should disclose the total of future
minimum lease payments at the reporting date, and their
present value, for each of the following periods:
(i) Not later than one year;
(ii) Later than one year and not later than five years; and
(iii) Later than five years;
(d) Contingent rents recognised as an expense in the period;
(e) The total of future minimum sublease payments expected to
be received under non-cancelable subleases at the
reporting date; and
(f) A general description of the lessee’s material leasing
arrangements including, but not limited to, the following:
(i) The basis on which contingent rent payable is
determined;
(ii) The existence and terms of renewal or purchase
options and escalation clauses; and
(iii) Restrictions imposed by lease arrangements, such as
those concerning return of net surplus, return of
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capital contributions, additional debt, and further
leasing.
41. In addition, the requirements for disclosure in accordance with ASLB
16, ‗Investment Property‘, ASLB 17, ‗Property, Plant and Equipment‘,
ASLB 21, ‗Impairment of Non-Cash-Generating Assets‘, ASLB 26,
‗Impairment of Cash-Generating Assets‘, and ASLB 31, ‗Intangible
Assets‘ are applied to the amounts of leased assets under finance
leases that are accounted for by the lessee as acquisitions of assets.
Operating Leases
42. Lease payments under an operating lease should be recognised
as an expense on a straight-line basis over the lease term, unless
either:
(a) Another systematic basis is representative of the time
pattern of the user’s benefit even if the payments to the
lessors are not on that basis; or
(b) The payments to the lessor are structured to increase in
line with expected general inflation to compensate for the
lessor’s expected inflationary cost increases. If payments
to the lessor vary because of factors other than general
inflation, then this condition is not met.
43. For operating leases, lease payments (including initial direct costs and
excluding costs for services) are recognised as an expense on a
straight-line basis, unless another systematic basis is representative of
the time pattern of the user‘s benefit, even if the payments are not on
that basis.
43A. Initial direct costs are often incurred by lessee in negotiating and
securing operating leasing arrangements and are added to the lease
payments. However, costs for services such as insurance and
maintenance are excluded from lease payments.
44. Lessees should disclose the following for operating leases:
(a) The total of future minimum lease payments under non-
cancelable operating leases for each of the following
periods:
(i) Not later than one year;
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(ii) Later than one year and not later than five years; and
(iii) Later than five years;
(b) The total of future minimum sublease payments expected to
be received under non-cancelable subleases at the
reporting date;
(c) Lease and sublease payments recognised as an expense in
the period, with separate amounts for minimum lease
payments, contingent rents, and sublease payments; and
(d) A general description of the lessee’s significant leasing
arrangements including, but not limited to, the following:
(i) The basis on which contingent rent payments are
determined;
(ii) The existence and terms of renewal or purchase
options and escalation clauses; and
(iii) Restrictions imposed by lease arrangements, such as
those concerning return of net surplus, return of
capital contributions, additional debt, and further
leasing.
Leases in the Financial Statements of Lessors
Finance Leases
45. This Standard describes the treatment of finance revenue earned
under finance leases. The term ―manufacturer or trader lessor‖ is used
in this Standard to refer to all entities that manufacture or trade assets
and also act as lessors of those assets, regardless of the scale of their
leasing, trading, and manufacturing activities. With respect to an entity
that is a manufacturer or trader lessor, the Standard also describes the
treatment of gains or losses arising from the transfer of assets.
46. Local Bodies may enter into finance leases as a lessor under a variety
of circumstances. Some local bodies may trade assets on a regular
basis. For example, local bodies may create special purpose entities
that are responsible for the central procurement of assets and supplies
for all other entities. Centralisation of the purchasing function may
provide greater opportunity to obtain trade discounts or other favorable
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conditions. In some cases, a central purchasing entity may purchase
items on behalf of other entities, with all transactions being conducted
in the name of the other entities. In other cases, a central purchasing
entity may purchase items in its own name, and its functions may
include:
(a) Procuring assets and supplies;
(b) Transferring assets by way of sale or finance lease; and/or
(c) Managing a portfolio of assets, such as a motor vehicle fleet, for
use by other entities, and making those assets available for
short or long term lease, or purchase.
47. Other local bodies may enter into lease transactions on a more limited
scale and at less frequent intervals. In particular, in some cases
entities that have traditionally owned and operated infrastructure
assets such as roads, dams, and water treatment plants are no longer
automatically assuming complete ownership and operational
responsibility for these assets. Local Bodies may transfer existing
infrastructure assets to private sector entities by way of sale or by way
of finance lease. In addition, local bodies may construct new long-lived
physical and infrastructure assets in partnership with private sector
entities, with the intention that the private sector entity will assume
responsibility for the assets by way of outright purchase or by way of
finance lease once they are completed. In some cases, the
arrangement provides for a period of control by the private sector
before reversion of title and control of the asset to the local body — for
example, a local body may lease the facility of water treatment plant to
a private sector company for a period of twenty years, after which time
the facility reverts to public control.
48. Lessors should recognise lease payments receivable under a
finance lease as assets in their balance sheet. They should
present such assets as a receivable at an amount equal to the net
investment in the lease.
49. Under a finance lease, substantially all the risks and rewards
incidental to legal ownership are transferred by the lessor, and thus
the lease payment receivable is treated by the lessor as repayment of
principal and finance revenue to reimburse and reward the lessor for
its investment and services.
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Initial Recognition
50. Initial direct costs are often incurred by lessors and include amounts
such as commissions, legal fees, and internal costs that are
incremental and directly attributable to negotiating and arranging a
lease. They exclude general overheads, such as those incurred by a
sales and marketing team. For finance leases other than those
involving manufacturer or trader lessors, initial direct costs are
included in the initial measurement of the finance lease receivable,
and reduce the amount of revenue recognised over the lease term.
The interest rate implicit in the lease is defined in such a way that the
initial direct costs are included automatically in the finance lease
receivable; there is no need to add them separately. Costs incurred by
manufacturer or trader lessors in connection with negotiating and
arranging a lease, are excluded from the definition of initial direct
costs. As a result, they are excluded from the net investment in the
lease, and are recognised as an expense when the gain or loss on
sale is recognised, which for a finance lease is normally at the
commencement of the lease term.
51. The recognition of finance revenue should be based on a pattern
reflecting a constant periodic rate of return on the lessor’s net
investment in the finance lease.
52. A lessor aims to allocate finance revenue over the lease term on a
systematic and rational basis. This revenue allocation is based on a
pattern reflecting a constant periodic return on the lessor‘s net
investment in the finance lease. Lease payments relating to the
accounting period, excluding costs for services, are applied against
the gross investment in the lease to reduce both the principal and the
unearned finance revenue.
53. Estimated unguaranteed residual values used in computing the
lessor‘s gross investment in a lease are reviewed regularly. If there
has been a reduction in the estimated unguaranteed residual value,
the revenue allocation over the lease term is revised, and any
reduction in respect of amounts already accrued is recognised
immediately.
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Leases
54. Manufacturer or trader lessors should recognise gains or losses
on sale of assets in the period, in accordance with the policy
followed by the entity for outright sales.
55. If artificially low rates of interest are quoted, any gains or losses
on sale of assets should be restricted to what would apply if a
market rate of interest were charged. Costs incurred by
manufacturer or trader lessors in connection with negotiating and
arranging a lease should be recognised as an expense when the
gain or loss is recognised.
56. Local Bodies that manufacture or trade assets may offer to potential
purchasers the choice of either buying or leasing an asset. A finance
lease of an asset by a manufacturer or trader lessor gives rise to two
types of revenue:
(a) The gain or loss equivalent to the gain or loss resulting from an
outright sale of the asset being leased, at normal selling prices,
reflecting any applicable volume or trade discounts; and
(b) The finance revenue over the lease term.
57. The sales revenue recognised at the commencement of the lease term
by a manufacturer or trader lessor is the fair value of the asset, or, if
lower, the present value of the minimum lease payments accruing to
the lessor, computed at a commercial rate of interest. The cost of sale
of an asset recognised at the commencement of the lease term is the
cost, or carrying amount if different, of the leased property, less the
present value of the unguaranteed residual value. The difference
between the sales revenue and the cost of sale is the gain or loss on
sale which is recognised in accordance with the entity‘s policy for
outright sales.
58. Manufacturer or trader lessors may sometimes offer customers lower
rates of interest than their normal lending rates. The use of such a rate
would result in an excessive portion of the total revenue from the
transaction being recognised at the time of sale. If artificially low rates
of interest are quoted, revenue recognised as gain or loss on sale is
restricted to what would apply if the entity‘s normal lending rate for that
type of transaction were charged.
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Compendium of Accounting Standards for Local Bodies (ASLBs)
59. Initial direct costs are recognised as an expense at the
commencement of the lease term because they are mainly related to
earning the manufacturer‘s or trader‘s gain or loss on sale.
60. Lessors should disclose the following for finance leases:
(a) A reconciliation between the total gross investment in the
lease at the reporting date, and the present value of
minimum lease payments receivable at the reporting date.
In addition, an entity should disclose the gross investment
in the lease and the present value of minimum lease
payments receivable at the reporting date, for each of the
following periods:
(i) Not later than one year;
(ii) Later than one year and not later than five years; and
(iii) Later than five years;
(b) Unearned finance revenue;
(c) The unguaranteed residual values accruing to the benefit of
the lessor;
(d) The accumulated allowance for uncollectible minimum
lease payments receivable;
(e) Contingent rents recognised in the income and expenditure
statement; and
(f) A general description of the lessor’s material leasing
arrangements.
61. As an indicator of growth in leasing activities it is often useful to also
disclose the gross investment less unearned revenue in new operation
added during the accounting period, after deducting the relevant
amounts for canceled leases.
Operating Leases
62. Lessors should present assets subject to operating leases in their
balance sheet according to the nature of the asset.
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Leases
63. Lease revenue from operating leases should be recognised as
revenue on a straight-line basis over the lease term, unless
either:
(a) another systematic basis is more representative of the time
pattern in which benefits derived from the leased asset is
diminished, even if the payments to the lessors are not on
that basis; or
(b) the payments to the lessor are structured to increase in line
with expected general inflation to compensate for the
lessor’s expected inflationary cost increases. If payments
to the lessor vary because of factors other than general
inflation, then this condition is not met.
64. Costs, including depreciation, incurred in earning the lease revenue
are recognised as an expense. Lease revenue (excluding receipts for
services provided such as insurance and maintenance) is recognised
as revenue on a straight line basis over the lease term, even if the
receipts are not on such a basis, unless another systematic basis is
more representative of the time pattern in which use benefit derived
from the leased asset is diminished.
65. Initial direct costs incurred by lessors in negotiating and
arranging an operating lease should be added to the carrying
amount of the leased asset, and recognised as an expense over
the lease term on the same basis as the lease revenue.
66. The depreciation policy for depreciable leased assets should be
consistent with the lessor’s normal depreciation policy for similar
assets, and depreciation should be calculated in accordance with
ASLB 17 or ASLB 31, as appropriate.
67. To determine whether a leased asset has become impaired, an entity
applies relevant impairment tests in accordance with ASLB 21,
‗Impairment of Non-Cash-Generating Assets‘ and ASLB 26,
‗Impairment of Cash-Generating Assets‘.
68. A manufacturer or trader lessor does not recognise any gain on sale
on entering into an operating lease because it is not the equivalent of
a sale.
69. Lessors should disclose the following for operating leases:
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Compendium of Accounting Standards for Local Bodies (ASLBs)
(a) The future minimum lease payments under non-cancelable
operating leases in the aggregate and for each of the
following periods:
(i) Not later than one year;
(ii) Later than one year and not later than five years; and
(iii) Later than five years;
(b) Total contingent rents recognised in the income and
expenditure statement in the period; and
(c) A general description of the lessor’s leasing arrangements.
Sale and Leaseback Transactions
70. A sale and leaseback transaction involves the sale of an asset and the
leasing back of the same asset. The lease payment and the sale price
are usually interdependent, because they are negotiated as a
package. The accounting treatment of a sale and leaseback
transaction depends upon the type of lease involved.
71. If a sale and leaseback transaction results in a finance lease, any
excess of sales proceeds over the carrying amount should not be
immediately recognised as revenue by a seller-lessee. Instead, it
should be deferred and amortised over the lease term.
72. If the leaseback is a finance lease, the transaction is a means whereby
the lessor provides finance to the lessee, with the asset as security.
For this reason, it is not appropriate to regard an excess of sales
proceeds over the carrying amount as revenue. Such excess is
deferred and amortised over the lease term.
73. If a sale and leaseback transaction results in an operating lease,
and it is clear that the transaction is established at fair value, any
gain or loss should be recognised immediately. If the sale price is
below fair value, any gain or loss should be recognised
immediately except that, if the loss is compensated by future
lease payments at below market price, it should be deferred and
amortised in proportion to the lease payments over the period for
which the asset is expected to be used. If the sale price is above
fair value, the excess over fair value should be deferred and
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Leases
amortised over the period for which the asset is expected to be
used.
74. If the leaseback is an operating lease, and the lease payments and the
sale price are at fair value, there has in effect been a normal sale
transaction and any gain or loss is recognised immediately.
75. For operating leases, if the fair value at the time of a sale and
leaseback transaction is less than the carrying amount of the
asset, a loss equal to the amount of the difference between the
carrying amount and fair value should be recognised
immediately.
76. For finance leases, no such adjustment is necessary unless (a) there
has been an impairment in value, and (b) that impairment is required
to be recognised in accordance with ASLB 21, ‗Impairment of Non-
Cash-Generating Assets‘ and ASLB 26, ‗Impairment of Cash-
Generating Assets‘ that has been adopted by the entity.
77. Disclosure requirements for lessees and lessors apply equally to sale
and leaseback transactions. The required description of the material
leasing arrangements leads to disclosure of unique or unusual
provisions of the agreement or terms of the sale and leaseback
transactions.
78. Sale and leaseback transactions may be required to be separately
disclosed in accordance with ASLB 1, ‗Presentation of Financial
Statements‘.
79-80. [Deleted]
81-87. [Refer to Appendix 1]
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Compendium of Accounting Standards for Local Bodies (ASLBs)
Implementation Guidance
This guidance accompanies, but is not part of, ASLB 13.
Classification of a Lease5
IG1. The objective of the chart on the next page is to assist in classifying a
lease as either a finance lease or an operating lease. A finance lease
is a lease that transfers substantially all the risks and rewards incident
to ownership of an asset. An operating lease is a lease other than a
finance lease.
IG2. The examples contained in this chart do not necessarily reflect all
possible situations in which a lease may be classified as a finance
lease, nor should a lease necessarily be classified as a finance lease
by virtue of the route followed in this chart. Whether a lease is a
finance lease or an operating lease depends on the substance of the
transaction rather than the form of the contract (paragraph 15).
IG3. In the flowchart, the numbers in parentheses refer to paragraph
numbers in this Standard.
5
Paragraphs 12 to 18 relating to classification of leases are not applicable to leases of
Land or/ and Building as all leases of land or/ and building are to be classified as
operating leases.
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Leases
-
Classification of a Lease
Examples of situations which would
normally lead to a lease being
classified as a finance lease (15)
individually or in combination
Ownership transferred by end of lease
term (15(a))
Lease contains bargain purchase option
(15(b))
Lease term is for the major part of Yes
asset‘s Economic life (15(c))
Present value of minimum lease
payment amount to substantially all the
asset value (15(d))
Specialized nature (15)
Not easily replaced (15)
Is the substance of the transaction that
of a finance lease (15)
No
Others indicators which
individually or in combination
could also lead to a lease being
classified as a finance lease (16)
Lessee bears lessor‘s cancellation
losses (16(a)) Yes
Lessee bears gains/ losses from
changes in fair value of residual (16(b))
Lessee has option to extend rental at
lower than market price (16(c))
Finance Lease
No
Operating Lease
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Compendium of Accounting Standards for Local Bodies (ASLBs)
Accounting for a Finance Lease by a Lessor
IG4. In the flowchart, the numbers in parentheses refer to paragraph
numbers in the Standard.
Finance Lease
Yes No
Is lessor a
manufacturer or trader?
A finance lease gives rise to two types of revenue:
(a) gain or loss equivalent to gain, or loss resulting
from an outright sale of the asset being leased;
and (b) the finance revenue over the lease term
(56).
Gain or loss that would result from outright sale of
asset being leased is recognised in accordance with
the policy normally followed by the entity for sales
(54). Special provisions apply to the calculation of
gains and losses where artificially low rates of
interest apply in the lease (55).
Recognise Gross investment in Unearned finance
aggregate as a lease = Minimum Lease revenue = gross
receivable at Payments + Minus investment in lease, less
inception of unguaranteed residual present value of gross
lease (48) value (8) investment in lease (8)
During the Reduce by lease Allocate to produce a
lease payments and constant periodic return
term residual value when on outstanding net
received (52) investment in lease (8)
Accounting for a Finance Lease by a Lessee
IG5. In the flowchart, the numbers in parentheses refer to paragraph
numbers in the Standard.
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Leases
Finance Lease
Calculate minimum lease payments (MLP) (8)
Determination of Discount Factor
Is the interest rate
implicit in lease
practicable to
determine? (28)
Yes
No
Discount factor is Discount factor is
At the interest rate implicit in lessee‘s incremental
inception of the lease (28) borrowing rate (28)
lease
Calculate Present Value of MLP
Is the present value of
MLP less than the fair
value of the asset? (28)
Y N
Yes o
Present value of MLP Fair value of asset
recorded as asset and recorded as asset
liability (28) and liability (28)
Recording as an Asset Recording as a Liability
Is ownership expected Lease liability reduced by
to be transferred at end rentals payable after allowing
of lease term? for finance charge (34)
During the
lease term
Y N
Ye o Finance charge allocated so
s
Depreciate Depreciate asset as to produce a constant
asset in same over shorter of periodic interest rate on
way as assets the lease term or outstanding liability (34)
owned (36) its useful life (36)
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Compendium of Accounting Standards for Local Bodies (ASLBs)
Sale and Leaseback Transactions that Result in
Operating Leases
A sale and leaseback transaction that results in an operating lease may give
rise to a gain or a loss, the determination and treatment of which depends
upon the leased asset‘s carrying amount, fair value, and selling price. The
table on the following page shows the requirements of this Standard in
various circumstances.
Sale price Carrying amount Carrying Carrying amount
established at equal to fair amount less above fair value
fair value value than fair value
(paragraph 65)
Gain no gain recognise gain no gain
immediately
Loss no loss no loss recognise loss
immediately
Sale price below Carrying Carrying Carrying
fair value amount equal to amount less amount above
(paragraph 65) fair value than fair value fair value
Gain no gain recognise gain no gain (note 1)
immediately
Loss not recognise loss recognise loss (note 1)
compensated by immediately immediately
future lease
payments at
below market
price
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Leases
Loss defer and defer and (note 1)
compensated by amortise loss amortise loss
future lease
payments at
below market
price
Sale price above Carrying Carrying Carrying
fair value amount equal to amount less amount above
(paragraph 65) fair value than fair value fair value
Gain defer and defer and defer and
amortise gain amortise gain amortise gain
(note 2) (note 3)
Loss no loss no loss (note 1)
Notes
1 These parts of the table represent circumstances that would have
been dealt with under paragraph 75 of this Standard. Paragraph 75
requires the carrying amount of an asset to be written down to fair
value where it is subject to a sale and leaseback.
2 If the sale price is above fair value, the excess over fair value should
be deferred and amortised over the period for which the asset is
expected to be used (paragraph 73).
3 The gain would be the difference between fair value and sale price, as
the carrying amount would have been written down to fair value in
accordance with paragraph 75.
Calculating the Interest Rate Implicit in a Finance Lease
IG7. The Standard (paragraph 28) requires the lessees of assets acquired
under finance leases to calculate the interest rate implicit in a lease,
where practical. Paragraph 34 requires the lessees to apportion lease
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Compendium of Accounting Standards for Local Bodies (ASLBs)
payments between the finance charge and the reduction of the
outstanding liability, using the interest rate implicit in the lease. Many
lease agreements explicitly identify the interest rate implicit in the
lease, but some do not. If a lease agreement does not identify the
interest rate implicit in the lease the lessee needs to calculate the rate,
using the present value formula. Financial calculators and
spreadsheets will automatically calculate the interest rate implicit in a
lease. Where these are not available, entities can use the present
value formula to manually calculate the rate. This guidance illustrates
the following two common methods for calculating the interest rate:
trial and error, and interpolation. Both methods use the present value
formula to derive the interest rate.
IG8. Derivations of present value formulas are widely available in
accounting and finance textbooks. The Present Value (PV) of Minimum
Lease Payments (MLP) is calculated by means of the following
formula:
PV(MLP) = S + A 1 - 1 .
(1+r)n r (1+r)n
Where:
―S‖ is the guaranteed residual value
―A‖ is the regular periodical payment
―r‖ is the periodic interest rate implicit in the lease expressed as a
decimal
―n‖ is the number of periods in the term of the lease
Example
IG8. Department X enters into an agreement to acquire a motor vehicle on
a finance lease. The fair value of the motor vehicle at the inception of
the lease is ₹ 25,000; the annual lease payments are ₹ 5,429 payable
in arrears; the lease term is four years; and the guaranteed residual
value is ₹ 10,000. The lease agreement does not provide for any
services additional to the supply of the motor vehicle. Department X is
responsible for all the running costs of the vehicle, including
insurance, fuel, and maintenance. The lease agreement does not
specify the interest rate implicit in the lease. The Department‘s
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Leases
incremental borrowing rate is 7% per annum. Several financial
institutions are advertising loans secured by motor vehicles at rates
varying between 7.5% and 10%.
Trial and Error Method
IG9. The calculation is an iterative process – that is, the lessee must make
a ―best guess‖ of the interest rate and calculate the present value of
the minimum lease payments and compare the result to the fair value
of the leased asset at the inception of the lease. If the result is less
than the fair value, the interest rate selected was too high; if the result
is greater than the fair value, the interest rate selected was too low.
The interest rate implicit in a lease is the rate used when the present
value of the minimum lease payments is equal to the fair value of the
leased asset at the inception of the lease.
IG10. Department X would begin calculations using a best estimate – for
example, its incremental borrowing rate of 7% per annum, which is too
low. It would then use the maximum feasible rate – for example, the
10% per annum rate offered for loans secured by a motor vehicle,
which would prove too high. After several calculations, it would arrive
at the correct rate of 8.5% per annum.
IG11. To calculate the interest rate, the Department uses the PV(MLP)
formula above, where:
S = 10,000 n = 4 r = Annual interest rate expressed as a decimal
A = 5,429 Target PV(MLP) = 25,000
IG12. At Department X‘s incremental borrowing rate of 7% (0.07) per annum
(figures are rounded):
PV(MLP) = 10,000 + 5,429 1 - 1 .
(1+ 0.07) 4 0.07 (1+ 0.07) 4
= 7,629 + 18,390
= 26,019
IG13. The PV(MLP) using the incremental borrowing rate is greater than the
fair value of the leased asset, therefore a higher rate is implicit in the
lease. The Department must make calculations at other rates to
determine the actual rate (figures are rounded):
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Compendium of Accounting Standards for Local Bodies (ASLBs)
PV(MLP) at 7.5% = 25,673 Interest rate too low
PV(MLP) at 10% = 24,040 Interest rate too high
PV(MLP) at 9% = 24,674 Interest rate too high
PV(MLP) at 8% = 25,333 Interest rate too low
PV(MLP) at 8.5% = 25,000 Correct interest rate
IG14. The Department will now use the interest rate of 8.5% to apportion the
lease payments between the finance charge and the reduction of the
lease liability, as shown in the table below.
Interpolation Method
IG15. Calculating the interest rate implicit in a lease requires lessees to
initially calculate the present value for an interest rate that is too high,
and one that is too low. The differences (in absolute terms) between
the results obtained and the actual net present value are used to
interpolate the correct interest rate. Using the data provided above,
and the results for 7% and 10%, the actual rate can be interpolated as
follows (figures are rounded):
PV at 7% = 26,019, difference = 1,019 (i.e., 26,019 – 25,000)
PV at 10% = 24,040, difference = 960 (i.e., 24,040 – 25,000)
r = 7% + (10% - 7%) 1,019
(1,019 + 960)
= 7% + (3% × 0.5)
= 7% + 1.5%
= 8.5%
IG16. Department X will now use the interest rate of 8.5% to record the lease
in its books and apportion the lease payments between the finance
charge and the reduction of the lease liability, as shown in the table
below.
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Leases
Apportionment of Lease Payment (figures are rounded)
Year 0 Year 1 Year 2 Year 3 Year 4
Opening PV of Lease 25,000 25,000 21,696 18,110 14,221
Liability
Interest Expense – 2,125 1,844 1,539 1,209
Reduction of Liability – 3,304 3,585 3,890 14,221
Closing Lease Liability 25,000 21,696 18,110 14,221 –
Includes payment of guaranteed residual value.
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Compendium of Accounting Standards for Local Bodies (ASLBs)
Appendix 1
Note: This Appendix is not a part of the Accounting Standard for Local
Bodies. The purpose of this Appendix is only to bring out the major
differences, if any, between Accounting Standard for Local Bodies (ASLB) 13
and the corresponding International Public Sector Accounting Standard
(IPSAS) 13, ‗Leases’.
Comparison with IPSAS 13, ‘Leases’
1. Different terminologies have been used in the ASLB 13 as compared
to corresponding IPSAS 13, e.g., the terms ‗balance sheet‘, ‗entities‘
and ‗income and expenditure statement‘ have been used in place of
‗statement of financial position‘, ‗public sector entities‘ and ‗statement
of financial performance‘.
2. The following paragraphs of IPSAS 13 have been deleted. In order to
maintain consistency with the corresponding IPSAS 13, the paragraph
numbers have been retained:
(i) Paragraphs 20A-24 have been deleted as a consequence of the
departure in the ASLB 13 pursuant to which all the leases of the
land or/and buildings are to be treated as operating leases. The
lease classification criteria given in the Standard is not to be
applied to the lease of land and/ or buildings.
(ii) Paragraphs 80A-C pertaining to transitional provisions have
been deleted as a separate ASLB 33, ‗First-time adoption of
Accrual basis ASLBs‘ has been issued that contains all
transitional provisions at one place.
(iii) Paragraphs 85-87 pertaining to effective date have been deleted
as ASLBs would become mandatory for the Local Bodies in a
State from the date specified by the State Government
concerned.
3. Paragraph 3 of IPSAS 13 that pertained to applicability of IPSASs has
been deleted by the IPSASB from this Standard because a separate
document of IPSASB on ‗Applicability of IPSASs‘ now deals with the
same. However, the provision pertaining to applicability of ASLBs has
been covered in the Standard itself in line with other issued ASLBs.
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Leases
4. The following paragraphs appear as ‗Deleted‘ in IPSAS 13. In order to
maintain consistency with paragraph number of IPSAS 13, this
paragraph number has been retained in ASLB 13.
(i) Paragraph 4,
(ii) Paragraph 19,
(iii) Paragraph 20,
(iv) Paragraph 79, and
(v) Paragraph 80.
5. The following paragraphs of IPSAS 13 have been amended to make
the same more relevant in the context of entities, i.e., Local Bodies in
India to whom the ASLB is applicable:
(i) Scope paragraph has been amended as ASLB 13 proposes to
consider all leases of land and/or buildings as operating leases.
(ii) Paragraph 8: The term ‗fair value‘ has been defined additionally
for more clarification within the Standard.
(iii) Provisions pertaining to payment of dividends or similar
distribution do not seem to be relevant in the context of entities,
i.e., Local Bodies in India to whom the ASLB is applicable.
Therefore, the same have been deleted. (refer paragraphs
40(f)(iii) & 44(d)(iii)).
(iv) ASLB 13 requires that in case of operating lease, where
escalation of lease rentals is in line with the expected general
inflation so as to compensate the lessor for expected
inflationary cost increases should not be straight lined. IPSAS
13 does not provide for the same (paragraph 42 and 63).
(v) Paragraph 43A has been inserted to clarify that initial direct
costs incurred by lessee in negotiating and security operating
lease are to be added in lease payments. IPSAS 13 does not
provide the same.
6. Consequential changes resulting from the above departures have
been made in the ASLB 13.
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Compendium of Accounting Standards for Local Bodies (ASLBs)
Appendix 2
Note: This Appendix is not a part of the Accounting Standard for Local
Bodies. The purpose of this Appendix is only to bring out the major
differences, if any, between Accounting Standard for Local Bodies (ASLB) 13
and the existing Accounting Standard (AS) 19, ‗Leases’ issued by the
Institute of Chartered Accountants of India.
Comparison with Existing AS 19, ‘Leases’
1. Different terminologies have been used in the ASLB 13 as compared
to the existing AS 19, e.g., the terms ‗income and expenditure
statement‘ and ‗trader lessor‘ have been used in place of ‗profit and
loss account‘ and ‗dealer lessor‘.
2. As per the ASLB 13, all leases of land or/and buildings are within the
scope of ASLB 13 and all such leases are to be treated as operating
leases. However, the lease agreements to use lands are excluded
from its scope from existing AS 9 and the lease of the buildings may
be operating or finance as per the criteria prescribed in the existing AS
19.
3. ASLB 13 prescribes when an entity has borrowings that are
guaranteed by the government then in that case the lessee‘s
incremental borrowing rate of interest will be lower due to existence of
any government guarantee and any related fees. However, existing AS
19 does not provide the same.
4. Existing AS 19 provides that in case of sale and leaseback transaction
that results in a finance lease, any excess of sales proceeds over the
carrying amount should be deferred and amortised over the lease term
in proportion to the depreciation of the leased asset. ASLB 13 retains
the deferral and amortisation principle, it does not specify any method
of amortisation.
5. Existing AS 19 provides certain exemptions in respect of the
disclosure requirements to a small and medium sized company/
enterprises. However, no such exemptions are provided to any local
body in the ASLB 13.
6. ASLB 13 requires that in case of operating lease, where escalation of
lease rentals is in line with the expected general inflation so as to
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Leases
compensate the lessor for expected inflationary cost increases should
not be straight lined. Existing AS 19 does not provide for the same.
7. ASLB 13 also clarifies that initial direct costs incurred by lessee in
negotiating and security operating lease are to be added in lease
payments. Existing AS 19 does not provide for the same.
8. Appendices and Implementation Guidance in the ASLB 13 are more
reflective of the circumstances of the Local Bodies.
175