IND AS 109 Security Deposit
Fair Value Calculator

A refundable, interest-free security deposit is a financial asset (if paid) or financial liability (if received). On Day 1 it is measured at fair value — the present value of the amount refundable at the end of the lease, discounted using a market interest rate. It is not recorded at its nominal value.

Because an interest-free deposit refundable years later is worth less today than its face value. IND AS 109 requires financial instruments to be measured at fair value on initial recognition, so the deposit is discounted at the effective interest rate (EIR) over the deposit tenure.

It is the gap between the nominal deposit paid and its present value on Day 1. For a deposit paid, this difference is treated as prepaid rent (a lease prepayment); for a deposit received, it is treated as deferred rental income. It represents the benefit of holding interest-free funds.

The prepaid rent (or deferred income) is amortised to the P&L on a straight-line basis as additional rent expense (or rental income) over the lease term. Separately, the deposit's present value is "unwound" each year using the EIR, recognised as finance income (if paid) or finance cost (if received), until it equals the nominal refundable amount at the end.

Use a market rate of interest for a similar instrument with a similar credit risk and tenure — often the incremental borrowing rate (IBR) of the entity. This calculator lets you enter the rate directly so you can match your auditor's assumption.

Yes. A deposit given (e.g. by a tenant) is a financial asset with finance income and prepaid rent. A deposit received (e.g. by a landlord) is a financial liability with finance cost and deferred rental income. This calculator handles both sides under IND AS 109 / IFRS 9.