 Today's topic is leases. Now let's first of all see the learning outcomes. Students will be able to understand what is meant by the term lease as per IFRS 16. What is the difference between operating and financial lease? Learn how to calculate and record the leasing transaction in financial statements. A lease is a contractual arrangement whereby the leaser, the person who owns the assets, allows the leasy to use the assets for a specified period of time. A time should be fixed, 2 years, 3 years, 4 years, 5 years, maybe 10 years. In return of a periodic payment and on every month or every quarter or every year they have to pay a certain sum of money. A financial lease is in substance purchase of an asset that is financed with debt. So if it is a financial lease, it means that you are buying an asset but you are not paying immediately or paying slowly over a period of time. The leasy record both assets and liability equal amount to the balance sheet. The leasy or liability both will record the leasy, although the asset is of leaser. The leasy will recognize depreciation on the assets and interest expense. Currently, under IFRS 16, they decided that there is no difference between financial lease and operating lease. In fact, let me just give you briefly what operating and financial lease is. Operating lease is basically like a rental that you let us say you hire, take a house for rent and you pay for the rent. You will never become owner of that house. You just keep paying the rent as long as you stay in that house. What is over a financial lease is concerned. After making all payments, you become the owner of that asset. That is the difference. That is why it is substantially it is you are the owner and that is why you are recording it in your books of accounts as well as liability. Operating lease is essentially a rental arrangement. No assets or liability is reported by the leasy and periodic lease payments are simply recognized as rental expense in the income statement. It is very clear but since IFRS 16, there is no difference between financial lease and operating lease. That is why now we have a bit simpler. The objective of IFRS 16 is to prescribe the less see and the lesser. The appropriate accounting policies and disclosure apply to less leases. This is one important thing. Since there is no distinction between operating lease and financial lease, anyone therefore all assets or leases to be treated leased assets and here again we used to use this word leased asset under financial lease or leased assets but now they are saying it is not like that. It is right of use asset. So the name is now asset when you borrow or you take it on lease. It is known as now assets right of use asset. In the books of less see and related raise liabilities and lesser will record receivable. So if you are recording the liability, so the other party will record receivable. Exemptions are leased to explore or use of mineral resources. So those are the long term leases. So they are not included in this chapter. Licensing arrangement like copyrights, movies and plays etc. That is also not included in this standard. Now, financial lease is a lease that substantially transferred the risk and reward of ownership to the less see. Important thing is the risk and reward of ownership is transferred to the less see. If the asset is given to the less see, he is 100% responsible for use whether maintenance also and operating lease is a other than the finance. So that's the definition given previously. The present value of the lease payment is substantially all of the fair value cash price in lease in finance lease. The substance of the transaction is that although less see is not legal owner of the machine, it has in commercial reality terms acquired the assets and using a finance deed debit right of use assets and credit obligation under finance lease by the present value of lease payment. This is an important word. Present value of the lease payment. For example, you are taking an asset for five years lease and each year you are paying let's say 10,000 every year. So it's not 50,000 asset, but you need to work out the present value of those payments and that will be your liability. The non-current asset should be depreciated over the shorter of the useful life of the assets and the lease term. Here, clearly, if an asset is let's say for 10 years life, but you are taking it for five years lease, so you need to depreciate it over a five years. Now, there is a bargain purchase option allow the less see to purchase the lease assets for a future price, which is substantially lower than the future fair price, fair value. This is also possible that if the less see want to buy this asset, so they have an agreement purchase option also. So what they do normally, they just pay a little amount and the asset will be transferred legally transferred in the name of the less see. If the option exists, the less see must increase the present value of the minimum lease payments by the present value of the option price, which is really the guaranteed residual value. Here also, there is a one is a guaranteed residual value if there is a residual value and if this is you are going to pay to get the asset in your name, then you should also include the residual value, present value also in your release payments. About the lease, we call it off balance sheet financing. It means we previously we don't use report in the balance sheet asset, although we are using the asset, we are generating revenue against this asset, but we are not we are not recording it in the balance sheet. So this is off balance sheet and it is no more allowed. Motivation for keeping finance of the balance sheet includes the following effect on leverage. If you are including the liability, it means your total liabilities are increasing. That's why you not to increase it now. Borrowing capacity, borrowing cost and management incentives. So these are various things which we used to have when we are not including the lease assets in our library in our balance sheet. Thank you very much.