diff --git a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/LocalFunctionGenerator.kt b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/LocalFunctionGenerator.kt
index d60e21f035a..3f3c4302427 100644
--- a/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/LocalFunctionGenerator.kt
+++ b/compiler/ir/ir.psi2ir/src/org/jetbrains/kotlin/psi2ir/generators/LocalFunctionGenerator.kt
@@ -40,8 +40,12 @@ class LocalFunctionGenerator(statementGenerator: StatementGenerator) : Statement
         irFun.body = BodyGenerator(lambdaDescriptor, statementGenerator.context).generateLambdaBody(ktFun)
         irBlock.statements.add(irFun)
 
-        irBlock.statements.add(IrCallableReferenceImpl(ktLambda.startOffset, ktLambda.endOffset, lambdaExpressionType,
-                                                       lambdaDescriptor, null, IrStatementOrigin.LAMBDA))
+        irBlock.statements.add(
+                IrCallableReferenceImpl(
+                        ktLambda.startOffset, ktLambda.endOffset, lambdaExpressionType,
+                        lambdaDescriptor, null, IrStatementOrigin.LAMBDA
+                )
+        )
 
         return irBlock
     }
@@ -58,17 +62,17 @@ class LocalFunctionGenerator(statementGenerator: StatementGenerator) : Statement
                 val irFun = generateFunctionDeclaration(ktFun)
                 irBlock.statements.add(irFun)
 
-                irBlock.statements.add(IrCallableReferenceImpl(ktFun.startOffset, ktFun.endOffset, funExpressionType,
-                                                               irFun.descriptor, null, IrStatementOrigin.ANONYMOUS_FUNCTION))
+                irBlock.statements.add(
+                        IrCallableReferenceImpl(
+                                ktFun.startOffset, ktFun.endOffset, funExpressionType,
+                                irFun.descriptor, null, IrStatementOrigin.ANONYMOUS_FUNCTION
+                        )
+                )
 
                 irBlock
             }
 
-    private fun generateFunctionDeclaration(ktFun: KtNamedFunction): IrFunction {
-        val funDescriptor = getOrFail(BindingContext.FUNCTION, ktFun)
-        val irFun = IrFunctionImpl(ktFun.startOffset, ktFun.endOffset, IrDeclarationOrigin.DEFINED, funDescriptor)
-        irFun.body = BodyGenerator(funDescriptor, statementGenerator.context).generateFunctionBody(ktFun.bodyExpression!!)
-        return irFun
-    }
+    private fun generateFunctionDeclaration(ktFun: KtNamedFunction): IrFunction =
+            DeclarationGenerator(context).generateFunctionDeclaration(ktFun)
 
 }
\ No newline at end of file
diff --git a/compiler/testData/ir/irText/declarations/defaultArguments.kt b/compiler/testData/ir/irText/declarations/defaultArguments.kt
index 052c38a6276..947d4f3620d 100644
--- a/compiler/testData/ir/irText/declarations/defaultArguments.kt
+++ b/compiler/testData/ir/irText/declarations/defaultArguments.kt
@@ -1 +1,3 @@
-fun test1(x: Int, y: Int = 0, z: String = "abc") {}
+fun test1(x: Int, y: Int = 0, z: String = "abc") {
+    fun local(xx: Int = x, yy: Int = y, zz: String = z) {}
+}
diff --git a/compiler/testData/ir/irText/declarations/defaultArguments.txt b/compiler/testData/ir/irText/declarations/defaultArguments.txt
index 47272280e3a..1263a446ecd 100644
--- a/compiler/testData/ir/irText/declarations/defaultArguments.txt
+++ b/compiler/testData/ir/irText/declarations/defaultArguments.txt
@@ -5,3 +5,11 @@ FILE /defaultArguments.kt
     z: EXPRESSION_BODY
       CONST String type=kotlin.String value='abc'
     BLOCK_BODY
+      FUN local final fun local(xx: kotlin.Int = ..., yy: kotlin.Int = ..., zz: kotlin.String = ...): kotlin.Unit
+        xx: EXPRESSION_BODY
+          GET_VAR 'value-parameter x: Int' type=kotlin.Int origin=null
+        yy: EXPRESSION_BODY
+          GET_VAR 'value-parameter y: Int = ...' type=kotlin.Int origin=null
+        zz: EXPRESSION_BODY
+          GET_VAR 'value-parameter z: String = ...' type=kotlin.String origin=null
+        BLOCK_BODY