X Ltd. prepares its financial statements based on Indian Accounting Standards. X Ltd. (lessee) enters into an agreement with Y Ltd. (lessor) to…

X Ltd. prepares its financial statements based on Indian Accounting Standards. X Ltd. (lessee) enters into an agreement with Y Ltd. (lessor) to lease an entire floor of a building for a period of 10 years with an option to extend the lease for five years. At the commencement date, X Ltd. is not reasonably certain to exercise the option to extend the lease. Lease payments are - 50,000 per year during the initial term and - 55,000 per year during the optional period. As per the terms of contract, lease payments are required to be paid at the beginning of each year. To obtain the lease, X Ltd. incurred initial direct costs of 20,000, out of which - 15,000 relates to a payment to a former tenant occupying that floor of the building and - 5,000 relates to commission paid to the real estate agent that arranged the lease. As an incentive to X Ltd. for entering into the lease, Y Ltd. agrees to reimburse to X Ltd. the real estate commission of 5,000. The interest rate implicit in the lease is not readily determinable by X Ltd. X Ltd.'s incremental borrowing rate is 10%. (Consider discounting factor upto 2 decimals) X Ltd. has deferred tax assets, recognised in the balance sheet at 31st March, 20X2 in respect of unused tax losses that can be used to reduce taxable income in future years. The income tax rate used to calculate the deferred tax asset was 40%, which was the current rate of tax applicable at the balance sheet date. A new government came to power on 1st April, 20X2 and passed legislation that, on 17th April, 20X2, the income tax rate was reduced to 33% with immediate effect.