Usually not, but it depends on your accounting standard and on one election your company makes. Under Ind AS 116, a company may keep leases of low-value assets, and leases of twelve months or less, off the balance sheet, and Ind AS 116 names personal computers as an example of a low-value asset. Under AS 19, an operating lease is expensed. Here is what decides it.
Which standard applies to you
Listed companies, and companies above the Ind AS thresholds, follow Ind AS 116 Leases. Most other companies follow AS 19 Leases, re-notified in the Companies (Accounting Standards) Rules, 2021. Your auditors will confirm which one you are on.
Ind AS 116: two exemptions that fit a laptop
Ind AS 116 normally puts a lease on the balance sheet: a right-of-use asset, and a lease liability for the payments. Paragraph 5 lets a lessee elect not to do that for two kinds of lease. Paragraph 6 says the payments on those leases are expensed, on a straight-line basis or another systematic basis.
| Short-term lease | Low-value asset lease | |
|---|---|---|
| Test | A lease term of 12 months or less at the start | The asset is of low value when new |
| Election made | By class of asset | Lease by lease |
| Fails if | The lease contains a purchase option | The asset is subleased, or depends heavily on other assets |
| Accounting | Lease payments expensed | Lease payments expensed |
Paragraph B8 gives the examples of low-value assets: "tablet and personal computers, small items of office furniture and telephones." ICAI's educational material on Ind AS 116 treats leases of laptops, desktops and mobile phones issued to employees as low-value leases. Ind AS 116 sets no rupee threshold; value is judged on an absolute basis, regardless of how large the company is, and on the asset's value when new.
What that means for a MacBook rental
- On a 12-month term, a rental can qualify as short-term, if the contract has no purchase option and your company elects the exemption for that class of asset.
- On a 24 or 36-month term, the short-term exemption does not apply, but the low-value exemption may: B8 names personal computers, and the election can be made lease by lease.
- If you do not elect, or your auditors judge that a high-end Mac is not low value, the lease goes on the balance sheet as a right-of-use asset and a lease liability, and the expense becomes depreciation plus interest.
- Subleasing breaks it. Macs you rent in order to hire out to your own clients do not qualify for the low-value exemption under B7.
AS 19: an operating lease is expensed
For a company on AS 19, a MacBook rental is normally an operating lease: the rental company keeps the risks and rewards of ownership, and the Mac goes back at the end. Paragraph 23 says operating lease payments are recognised as an expense on a straight-line basis over the lease term, unless another systematic basis better reflects the benefit. Nothing goes on the balance sheet beyond the refundable deposit you have paid.
A buy, for comparison
A bought Mac is a fixed asset under either standard. It is depreciated over its useful life in the books, and for income tax at 40% a year on the written-down value. If the deciding question is cost rather than presentation, our rent-or-buy calculator compares the two routes after GST credit and tax.
Questions to settle with your auditors
- Which standard do we follow, and have we elected the short-term or low-value exemptions?
- Do our auditors accept a current MacBook as a low-value asset when new?
- Does the rental contract contain a purchase option?
We are a rental company, not your auditors. This is how the standards read; the judgement on your books is theirs.
Need the contract terms in writing before the audit conversation? Ask for a quote with the term, the deposit and the end-of-term options set out: rentals.adalwin.com/quote.
Questions
Does a laptop rental go on the balance sheet under Ind AS 116?
Not if the company elects an exemption. Ind AS 116 paragraph 5 allows leases of 12 months or less, and leases of low-value assets, to be expensed instead. Paragraph B8 names personal computers as an example of a low-value asset.
Is there a rupee threshold for low-value assets under Ind AS 116?
No. Ind AS 116 judges low value on an absolute basis, on the asset's value when new, and sets no rupee figure. Your auditors make the judgement.
How is a MacBook rental accounted for under AS 19?
As an operating lease in the normal case: paragraph 23 requires the rent to be expensed on a straight-line basis over the lease term.
Does a 36-month laptop rental qualify as a short-term lease?
No. A short-term lease under Ind AS 116 has a term of 12 months or less at the start. A 36-month rental may still qualify for the low-value exemption.
12+ years in corporate procurement, gifting, and IT supply-chain in India. Leads an authorised Apple DPP Partner and Logitech Enterprise Partner serving 110+ enterprises. About Sameer K Singh →
