Ind-AS 101

First Time adoption of Ind-AS

1
 Ind-AS 101 : First Time Adoption of Ind-AS

2016
1 04

2
 3
Ind-AS 101 : Snap Shot
Appendices forming integral part of the Standard
A = Defined terms.
B = Mandatory Exceptions to the retrospective
application of other Ind-ASs.
C = Voluntary exemptions for business
combinations.
D = Voluntary Exemptions from other Ind_ASs.
 Ind-AS 101 : Objective
To ensure that an entity’s first Ind-AS financial statements, and
its interim financial reports for part of the period covered by
those financial statements, contain high quality information
that:

(a) is transparent for users and comparable over all periods

presented;

(b) provides a suitable starting point for accounting in

accordance with Indian Accounting Standards (Ind-ASs); and
(c) can be generated at a cost * that does not exceed the
benefits.

4 Interim Financial Statements only if Ind-AS 34 is applicable or followed by entity.

 Ind-AS 101 : Mapping Conversion
1.What is 1st Ind-AS Financial statements
2. Ans. to Q1 determine Date of Transition
3. Prepare Opening Ind-AS - SOFP
4. Avail of Voluntary Exemptions & Be careful
of Mandatory Exceptions.
5. Select Appropriate Policies.
6. Differences to be recognised in Retained
or Revaluation Reserve or Goodwill.

Compiled & Presented By CA Yagnesh Desai

 Ind-AS 101 : Definitions
First Time Adopter : (FTA) An entity is referred to as a first-
time adopter in the period in which it presents its First Ind-AS
financial statements.

Date of Transition : The beginning of the earliest period for

which an entity presents full comparative information under
Ind-AS in its “First Ind-AS Financial Statements”.

First Ind-AS Financial Statements : The first annual financial

statements in which an entity adopts Ind-AS by making an
explicit and unreserved statement of compliance with Ind-AS.

6
 Ind-AS 101 : Definitions
Opening Ind-AS statement of financial
position: An entity’s statement of financial
position at the date of transition to Ind-ASs.

First Ind-AS Reporting Period :The latest

reporting period covered by an entity’s first
Ind-AS financial statements.

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 How An Entity Adopts Ind-AS ?
Ind-AS 101 applies when an entity adopts
Ind-AS for the first time by an explicit and
unreserved statement of compliance with
Ind-ASs.

This means compliance with ALL Ind-ASs

Partial Compliance is not enough to make

an entity Ind-AS Compliant.
8 Nothing like “Subject to” or “ Except for”
 Which Accounting Policies to be applied ?
In its opening Ind-AS statement of
financial position

Use Same
And Throughout all the
Accounting
Comparative periods presented
Policies
And , (Of course) in it’s First Ind-
AS Financial Statements

Those accounting policies shall comply with each Ind-AS

effective at the end of its first Ind-AS reporting
period, with some exceptions. Para 13-19 &
Appendices B-E.
Accounting Policies - Analysis
Application of Accounting policies effective at the
date of First Ind-AS reporting period

Even if such policies were not operative at

the date of transition. !!!!

Subject , of course , to those Mandatory exceptions

and Voluntary Exceptions.

10
 Ind-AS 101 : First Time Adoption of Ind-AS

Requirements

General Specific

To comply with each Ind-AS To recognise, De-recognise,

effective at the measure & re-classify in the
end of its first Ind-AS opening Ind-AS statement of
reporting period. financial position that it
prepares------------------->

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 Ind-AS 101: Specific Requirement
(a) recognise all assets and liabilities whose recognition is
required by Ind-ASs;

(b) not recognise items as assets or liabilities if Ind-ASs do

not permit such recognition;

(c) reclassify items that it recognised under previous GAAP

as one type of asset, liability or component of equity, but
are a different type of asset, liability or component of equity
under Ind-ASs; and

(d) apply Ind-AS s in measuring all recognised assets and

liabilities.

12 Subject to limited Exemptions & Mandatory Exceptions >

Steps in Transition to Ind-AS:

• Selection of accounting policies that comply with Ind-AS.

• Preparation of an opening Ind-AS balance sheet at the date of
transition to Ind-AS as the starting point for subsequent accounting
under Ind-AS.

• Recognize all assets and liabilities whose recognition is required under Ind-
AS;
• Derecognize items as assets or liabilities if Ind-AS does not permit such
recognition;
• Reclassify items in the financial statements in accordance with Ind-AS;
and
• Measure all recognized assets and liabilities according to principles set
forth in Ind-AS.

• Presentation and disclosure in an entity’s first Ind-AS financial

statements and interim financial reports.
 Recognise
• Defined benefit pension plans (Ind-AS 19)
• Deferred taxation (Ind-AS 12)
• Assets and liabilities under Appendix C De-
commissioning Liability
• Provisions where there is a legal or
construction obligation (Ind-AS 37)
• Derivative financial instruments (Ind-AS
39)
• Share-based payments (Ind-AS 2)
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 De Recognise

Provisions where there is no legal or constructive
obligation (e.g., general reserves, )

Internally generated intangible assets (Ind-AS 38)

Deferred tax assets where recovery is not probable

(Ind-AS 12)

Provision for Dividend ( Ind-AS 10)

Preliminary & Pre-Operative expenses.

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 Classify
• Investments accounted for in accordance with Ind-AS 39
• Certain financial instruments previously classified as
equity
• Any assets and liabilities that have been offset where the
criteria for offsetting in
Ind-AS are not met—for example, the offset of an
insurance recovery against a provision
• Noncurrent assets held-for-sale (Ind-AS 5)
• Non-controlling interest (Ind-AS 27)

16
 Measure ( rather remeasure !!!)

Receivables (Ind-AS 18)

Inventory (Ind-AS 2)

Employee benefit obligations (Ind-AS
19)

Deferred taxation (Ind-AS 12)

Financial instruments (IndAS 39)

Investment Property ( Ind-AS 40)

Property Plant & Equipment (Ind-AS 16)
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 Ind-AS 101 : Exemptions & Exceptions

Limited exemptions from these requirements in
specified areas where the cost of complying with
them would be likely to exceed the benefits to
users of financial statements.

Also prohibits retrospective application of Ind-

ASs in some areas, particularly where
retrospective application would require
judgements by management about past
conditions after the outcome of a particular
transaction is already known.
18
Exemptions & Exceptions discussed in details later
 Ind-AS 101 : Applicability
An entity shall apply this Ind-AS in:

(a) its first Ind-AS financial

statements; and
(b) each interim financial report, if
any, that it presents in accordance
with Ind-AS 34 Interim Financial
Reporting for part of the period covered by
its first Ind-AS financial statements.
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 Transitions
Provisions Do not
Apply to FTA

Save and except deregonition of

financial assets & financial
Liabilities & hedge accounting
as per Ind-AS 39, Insurance
Contract, Service Concession &
Borrowing Cost
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All Documents as 1st April, 31st March 31st March
per Ind-AS , based 2015 2016 2017
on Policies @
31.3.2017

Balance Sheet Yes Yes Yes

Profit or Loss No Yes Yes
Account
Cash Flow No Yes Yes
Statements
Statement of No Yes Yes
Changes in Equity

Notes and No Yes Yes

Comparative
Information
21
Treatment Under Ind-AS

Comparatives need not be given under Ind-As

An option is given to the entity to give comparatives

In that case the entity has to give figures of comparatives as
Memoranda

In that case the comparatives will be as ---

22
New Ind-AS Announced but not Mandatory

If a new Ind-AS is not yet mandatory

but permits early application, entity is
permitted, but NOT required, to apply
that Ind-AS in its :

“First Ind-AS Financial Statements”.

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 Effect of
Transition on

Financial Financial Cash

Position Performance Flows

24
Reconciliations an entity’s first Ind-AS financial statements
shall include:

(a) reconciliations of its equity reported in accordance with

previous GAAP to its equity in accordance with Ind-ASs for
both of the following dates:
(i) the date of transition to Ind-ASs; and

(ii) the end of the latest period presented in the entity’s most
recent annual financial statements in accordance with
previous GAAP.
Equity Under Local GAAP Reconciled
on 31.3.2010 / 2011 with

Equity Under Ind-AS Equity Under Ind-

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as on 1.4.2010 AS on 31.3.2011.
 (b) a reconciliation to its total
comprehensive income in accordance with
Ind-ASs for the latest period in the entity’s
most recent annual financial statements.

The starting point for that reconciliation

shall be total comprehensive income in
accordance with previous GAAP for the
same period or, if an entity did not report
such a total, profit or loss under previous
GAAP.
26
During the Year * Para 27A & 27AA
 Reconciliations and Interim financial statements

(a) Each such interim financial report shall, if the entity

presented an interim financial report for the
comparable interim period of the immediately
preceding financial year, include:

(i) a reconciliation of its equity in accordance with

previous GAAP at the end of that comparable interim
period to its equity under Ind ASs at that date; and

(ii) a reconciliation to its total comprehensive income in

accordance with Ind ASs for that comparable interim
period (current and year to date).

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 Reconciliations and Interim financial statements

(b) In addition to the reconciliations required by (a), an

entity’s first interim financial report in accordance with
Ind AS 34 for part of the period covered by its first Ind
AS financial statements shall include the reconciliations
described in paragraph 24(a) and (b) or a cross-
reference to another published document that includes
these reconciliations.

(c) If an entity changes its accounting policies or its use

of the exemptions contained in this Ind AS, it shall
explain the changes in each such interim financial
report in accordance with paragraph 23 and update the
reconciliations required by (a) and (b).

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 (c) Recognition or reversal of impairment
losses for the first-time in preparing its
opening Ind-AS statement of financial
position,

Disclosures that Ind-AS 36 Impairment of

Assets would have required if the entity had
recognised those impairment losses or
reversals in the period beginning with the
date of transition to Ind-ASs.
29
 Transition Adjustments

Exception
Retained Another
category of
Earnings
Equity

Goodwill*
Tax Impact

30 Adjustment to Intangible Assets

Revaluation Reserve Retained Earnings –Source

Difference between cost of Most Changes resulting from

available–for-sale investments applying initial recognition
and their fair value and measurement criteria

Result of remeasuring From Changes in accounting

derivative financial classified policies upon 1st time
as cash flow hedge in adoption.
accordance with Ind-AS 39
Cost of Property plant and Cost of Property plant and
equipment and fair value equipment and fair value
where the allowed alternative where the allowed alternative
as per Ind-AS 16.31 is adopted as per Ind-AS 16.30 is adopted

31 Adjustment to Intangible Assets

 General Rule Retrospective Application

Exceptions to the retrospective application of other Ind-

ASs.

This Ind-AS prohibits retrospective application of some

aspects of other Ind-ASs. These exceptions are set out in
paragraphs 14–17 – (Estimates) and Appendix B. ( Ind-
AS 1.13)

32
 Ind-AS 1 : Mandatory Exceptions fro
retrospective applications – Appendix B
 De-recognition of financial assets and liabilities

 Hedge accounting

 Non Controlling Interest

 Para 14 -17 of Ind-AS – Estimates.

 Classification and measurement of financial assets (paragraph B8);

and

 Embedded derivatives

 Government Loans

33
 Mandatory Exceptions : Dercognition of
Financial Assets & Financial Liabilities

Financial assets or financial liabilities derecognised under its

previous GAAP in a financial year prior to January 1, 2004,
should NOT be recognized by an entity.

Except for all derivatives and other interests retained after

derecognition and still existing, and consolidate all special-
purpose entities (SPE) that it controls at the date of transition
to Ind-AS

34
 Mandatory Exceptions :Hedge Instruments

On the date of Transition an entity should

(a)measure all derivatives at fair value; and

(b) eliminate all deferred losses and gains

arising on derivatives that were reported in
accordance with previous GAAP as if they
were assets or liabilities.

Applies to derivatives financial instruments

under previous GAAP.
35
 Mandatory Exceptions :Hedge Instruments

Transitional provisions of Ind-AS 39 apply

to hedging relationships of a first-time
adopter at the date of transition to Ind-AS.
This is an Exception to Para 9:

Transactions entered into before the date of

transition to Ind-ASs shall not be
retrospectively designated as hedges.

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 Mandatory Exception :Non-controlling interests
Requirements of Ind-AS 27 (as amended in 2008) to be
applied prospectively :
(a) total comprehensive income is attributed to the owners
of the parent and to the non-controlling interests even if
this results in the non-controlling interests having a deficit
balance;
(b) accounting for changes in the parent’s ownership
interest in a subsidiary that do not result in a loss of
control; and
(c) accounting for a loss of control over a subsidiary, and
the related requirements of paragraph 8A of Ind-AS 105
Non-current Assets Held for Sale and Discontinued
Operations.
 Mandatory Exception :Non-controlling
interests

However, if a first-time adopter elects to

apply Ind-AS 103 retrospectively to past
business combinations, it shall also apply
Ind-AS 27 accordance with paragraph C1 of
this Ind-AS.

In other words, this restriction shall not

apply.

38
 Classification and Measurement of Financial
Assets

Assess whether a financial asset

meets the conditions in paragraph
4.1.2 of Ind-AS 109 on the basis of
the facts and circumstances that
exist at the date of transition to
Ind-ASs.
Prepared & Presented By CA Yagnesh Desai
39 yagnesh@caymd.com
 Embedded Derivatives
Assess whether an embedded derivative is required to be
separated from the host contract and accounted for as a
derivative on the basis of the conditions that existed

at the later of the date

it first became a party to the contract

and

the date a reassessment is required by paragraph B4.3.11 of

Ind-AS 109.

40
 Government Loan
A first-time adopter shall classify all government loans received as a
financial liability or an equity instrument in accordance with Ind AS 32,
Financial Instruments: Presentation.

Exception : Below market rate Loan

The requirements in Ind AS 109, Financial Instruments, and Ind AS 20,

Accounting for Government Grants and Disclosure of Government Assistance,
prospectively to government loans existing at the date of transition to
Ind ASs and shall not recognise the corresponding benefit of the
government loan at a below-market rate of interest as a government
grant

Still the entity is not precluded from restating Government Loan

retrospectively provided that the information needed to do so had been
obtained at the time of initially accounting for that loan.
41
 Estimates - Hindsight prohibited

Estimates in accordance with Ind-ASs at the

date of transition to Ind-ASs shall be
consistent with estimates made for the same
date in accordance with previous GAAP
(after adjustments to reflect any difference
in accounting policies),unless there is
objective evidence that those estimates
were in error.

42
 Estimates - Hindsight prohibited

In other words, estimates made by the entity in

accordance with local GAAP shall not be changed in view
of the developments after the transition date.

For example, an entity made provision on 31st March,2011

, for Rs. 1 lakh. By the time the entity prepares 1st Ind-AS
Financial Statements – the said liability was settled for
Rs. 80,000.00

43
 Estimates - Illustration
How much should the provision be measured at when an entity
make in the 1st Ind-As Financial Statement prepared on 1st
April,2011 ?

A. Rs. 80,000 or B. 1,00,000

The Answer is B,

A. The entity should not take into account the developments

after 1st April,2011 while preparing opening Ind-As Balance
Sheet as on 1st April,2011. Such information to be treated as
non-adjusting events after the reporting period in
accordance with IAS 10 Events after the Reporting Period.
44
 Estimates
Information received after the date of transition to
Ind-ASs

About estimates that it had made under previous

GAAP.

To be treated as non-adjusting events after the

reporting period in accordance with Ind-AS 10 Events
after the Reporting Period.

45
 Estimates I
If estimate as well as amount recognised under
previous GAAP & Ind-AS are the same

On the date of Transition an entity should not make any

changes.

Retain the same amount and classifications.

46
 Estimates II
Estimate required to be made under previous
GAAP, but measurement principle differs under
Ind-AS.

Estimates made under previous GAAP needs to be

revised to comply with Ind-AS.

For Example a provision made for Warranties but

at nominal value under previous GAAP , now need
to be discounted under Ind-AS.

Prepared & Presented By CA Yagnesh Desai

47 yagnesh@caymd.com
 Estimates III – Not Required under Previous
GAAP but Required under Ind-AS
Will reflect the conditions at the date of Transition

For Example ,the provision on opening balance sheet for an

onerous rental contract in a foreign operation should be
calculated using

Rental rates

Interest rates and

Exchange rates

Prevailing as at the date of the Transition.

48
 These requirements also apply

to a comparative period presented in an

entity’s first Ind-AS financial statements,

in which case the references to the date of

transition to Ind-ASs

are replaced by references to the end of

that comparative period. i.e., 31st March,
2011.

49
 Estimates – Summary
Estimate Recognition Measurement Accounting
Treatment

I GAAP Yes Yes No

Adjustment
Ind-AS Yes Yes

I GAAP Yes No Adjust

Ind-AS Yes Yes Partially
I GAAP No No Recognise &
measure as
Ind-AS Yes Yes per Ind-AS.
50
 Voluntary Exemptions – General

An entity may elect to use one or more of the following exemptions:

(a) Business Combination

(b) Share-based payment transactions
(c) Insurance contract
(d) Fair value or revaluation as deemed cost
(e) Leases
(f) Deleted
(g) cumulative translation differences
(h) investments in subsidiaries, jointly controlled entities and
associates
(i) assets and liabilities of subsidiaries, associates and joint ventures
(j) compound financial instruments

51
 Voluntary Exemptions - General
(k) designation of previously recognised financial instruments

(l) fair value measurement of financial assets or financial liabilities at initial

recognition

(m) decommissioning liabilities included in the cost of property, plant and

equipment

(n) financial assets or intangible assets accounted for in accordance with Service
Concession Arrangements

(o) borrowing costs

An entity shall not apply these exemptions by analogy to

52 other items.
 Voluntary Exemptions - General

(p)extinguishing financial liabilities with equity instruments

(q) severe hyperinflation
(r) joint arrangements
(s) stripping costs in the production phase of a surface mine
(t) designation of contracts to buy or sell a non-financial item
(u) revenue from contracts with customers
(v) non-current assets held for sale and discontinued
operations

An entity shall not apply these exemptions by analogy to

53 other items.
 VE – Ind-AS 102 – Equity Instruments *
For Equity Instruments Granted
Before 7th November 2002 After 7th November 2002 and vested
before the later
of (a) the date of transition to Ind-
ASs and (b) 1 January 2005…

Not required but encouraged to apply Ind-AS for such

instruments – BUT shall disclose the information required
by para 42 and 45 of Ind-AS 102.
However, for Ind AS 101 purposes, all these dates have been changed to
coincide with the transition date elected by the entity adopting these
converged standards i.e. Ind AS.

54
 VE – Insurance Contracts Ind-AS 104

A first-time adopter may apply

the transitional provisions in
Ind-AS 104 Insurance Contracts.

55
 VE Fair Value or Revaluation as Deemed
Cost
Plant Property & Equipment
Fair Value as the deemed cost Revaluation at or before the
of that asset date of transition as the
deemed cost of that asset

Revaluation broadly
IF
comparable to fair value or
cost of depreciated cost in
accordance with Ind-AS.

56 Disclosure as per Para 30 of Ind-AS 101

VE : Investment Property & Intangible Assets
Same as the Plant, Property and equipment
Investment Property Intangible Assets

If Entity follows Cost Model, If IA meets he recognition

meaning if Fair Value Model criteria under Ind-AS 38,
is followed , this option is not i.e. cost measured reliably
allowed *****
AND criteria for
Treatment under Ind- revaluation.
AS

An entity shall not use these elections for

other assets or for liabilities.
Class Land Bldg Plant

Items 20 25 100

Post Ind-AS Revaluation Cost Cost

On
Transition 10 20 70
Can be Cherry Pick
 Deemed cost under previous GAAP

If at or before the date of transition – retain such deemed cost

– revalued amount

What if the such event takes place after the date of transition
but during the period Covered by the first Ind-AS financial statements ?

Can an entity apply such deemed cost ?

If yes , where the difference would be recognised ?

59
Additional Exemption Under Ind-AS D7AA

A first-time adopter may elect to continue with the carrying

value for all of its property, plant and equipment as
recognised in the financial statements as at the date of
transition measured as per the previous GAAP and use that
as its deemed cost as at date of transition after making
necessary adjustments in accordance with paragraph D21 –
fro de-commissioning cost and para D 21A for Oil & gas
Assets. This exemption is also applicable to intangible assets
and investment property.

Be careful – This exemption is not available on asset by asset

basis – its for all assets. This option is not available under
Ind-AS 1

60
Additional Exemption Under Ind-AS D7AA

 If subsidiary was consolidated

Previous GAAP amount of the subsidiary shall be that amount used in
preparing and presenting consolidated financial statements.

 If the Subsidiary was not consolidated

The amount required to be reported by the subsidiary as per previous
GAAP in its individual financial statements shall be the previous GAAP
amount.

 No further adjustments to the deemed cost of the property, plant and

equipment so determined in the opening balance sheet

61
Precaution : When an entity adopts the exemption option
provided in Paragraph D7AA

 The fact and the accounting policy shall be

disclosed by the entity until such time that those
items of Property, plant and equipment,
investment properties or intangible assets, as the
case may be, are significantly depreciated,
impaired or derecognised from the entity’s
Balance Sheet.

62
Disclosure - Fair value – PPE – Intangible Assets
and Investment Property -Para 30 of Ind-AS 101

The entity’s first Ind AS financial statements shall

disclose, for each line item in the opening Ind AS
Balance Sheet:

(a) the aggregate of those fair values; and

(b) the aggregate adjustment to the carrying

amounts reported under previous GAAP.

63
 VE :Lease Ind-AS 17

A first-time adopter may apply the

transitional provisions in Appendix C to Ind-
AS 17 Determining whether an Arrangement
contains a Lease as also may determine whether the
arrangement contains a lease by applying the criteria
in paragraphs 6–9 of the Appendix C on the basis of
facts and circumstances existing on the date of
Transition. except where the effect is expected to be
not material.
 Whether an arrangement contains a
lease ? And Land and Building

Appendix C May be applied prospectively

For Land and Building

When a lease includes both land and building elements, a first time adopter
may assess the classification of each element as finance or an operating lease at
the date of transition to Ind ASs on the basis of the facts and circumstances
existing as at that date. If there is any land lease newly classified as finance
lease then the first time adopter may recognise assets and liability at fair value
on that date; and any difference between those fair values is recognised in
retained earnings.

65
 VE : Employee Benefits

This Exemption has been deleted 2012 Edition of Ind-AS

However , Ind-As 101 gives option an entity to recognise

Employee cost as under :

“a first time adopter may elect to recognise all cumulative

actuarial gains and losses subsequent to the date of transition
to Ind-AS in other comprehensive income.”

66
 Treatment under Ind-AS 101
Employee Benefits

A first time adopter may elect to

recognise all cumulative actuarial gains
and losses subsequent to the date of
transition to Ind-AS in other
comprehensive income.

67
 VE : Cumulative Translation Differences
Ind-AS 21 The Effects of Changes in Foreign Exchange
Rates) requires an entity:

to recognise some translation differences in

other comprehensive income and accumulate
these in a component of equity

to transfer, on disposal, the cumulative

translation differences for foreign operations to
profit or loss as part of the gain or loss on
disposal
68
 VE : Cumulative Transitional Differences
A first-time adopter is exempted from a transfer of the
cumulative translation adjustment that existed on the date
of transition to Ind-AS.

Upon Exercise of this exemption the cumulative translation

adjustment for all foreign operations would be deemed to
be zero at the date of transition to Ind-AS.

The gain or loss on subsequent disposal of any foreign

operation should exclude translation differences that
arose before the date of transition to Ind-AS, but would
include all subsequent translation adjustments.

69
 Long Term Foreign Currency Monetary
Items

D13AA A first-time adopter may continue the policy

adopted for accounting for exchange differences arising
from translation of long-term foreign currency
monetary items recognised in the financial statements
for the period ending immediately before the
beginning of the first Ind AS financial reporting period
as per the previous GAAP.

70
Investments in subsidiaries, jointly controlled entities and
associates – In Separate Financial Statements

Cost Ind-AS 39

Cost or

Deemed Cost which can be :-

Fair Value as per Ind-AS 39 or

Previous GAAP Carrying Amount

71
 Use of deemed cost for investments in
subsidiaries, joint ventures and associates
The entity’s first Ind AS separate financial statements shall disclose:

(a) the aggregate deemed cost of those investments for which deemed
cost is their previous GAAP carrying amount;

(b) the aggregate deemed cost of those investments for which deemed
cost is fair value; and

(c) the aggregate adjustment to the carrying amounts reported under

previous GAAP.

72
 Use of deemed cost after severe
hyperinflation
 If an entity elects to measure assets and liabilities at fair
value and to use that fair value as the deemed cost in its
opening Ind AS Balance Sheet because of severe
hyperinflation ( Per paragraphs D26–D30), the entity’s first
Ind AS financial statements shall disclose an explanation of
how, and why, the entity had, and then ceased to have, a
functional currency that has both of the following
characteristics:

(a) a reliable general price index is not available to all entities

with transactions and balances in the currency.

(b) exchangeability between the currency and a relatively

73 stable foreign currency does not exist.
 When an entity exemption in Para:-

D8A(b) to use deemed cost for oil and gas

assets, and

D8B to use deemed cost for operations

subject to rate regulation

It shall disclose that fact and the basis on

which carrying amounts were determined
under previous GAAP.
74
 VE : Assets and Liabilities of Subsidiaries,
associates and joint ventures.

Key factor : Who adopts Ind-AS first –

Parent or

Subsidiary .

75
 Parent - Subsidiary
A first-time adopter consolidates all subsidiaries (as defined in Ind-AS
27), unless Ind-AS 27 requires otherwise.

If a first-time adopter did not consolidate a subsidiary in accordance with

previous GAAP, then in its consolidated statements :

Treatment depending on who has adopted Ind-AS First.

If Subsidiary was Acquired If Subsidiary was not acquired

Parent Recognises Goodwill Parent does not recognised

Goodwill

76
Consider Income tax & Non Controlling Interest
 Parent adopts in 2009 Subsidiary in 2011
Parents Consolidated Financial Subsidiary’s Separate Financial
Statements Statements.
However, the fact that subsidiary The carrying amounts of its
becomes a first-time assets and liabilities are the same
adopter in 2011 does not change in both its opening Ind-AS
the carrying amounts of its assets statement of
and liabilities in parent’s financial position at 1 January
consolidated financial statements. 2010 and parent N’s consolidated
statement of financial position
(except for adjustments for
consolidation procedures) and
are based on parent ’s date of
transition to Ind-ASs. OR

77
 Parent adopts in 2009 Subsidiary in 2011
Parents Consolidated Financial Subsidiary’s Separate Financial
Statements Statements.
The fact that subsidiary O OR ..Measure all its
becomes a first-time
adopter in 2011 does not assets or liabilities
change the carrying based on its own
amounts of its assets and date of transition to
liabilities in parent N’s
consolidated financial Ind-ASs (1 January
statements 2010).

78
 Parent adopts in 2011Subsidiary in 2009
Parents Consolidated Financial Subsidiary’s Separate Financial
Statements Statements.
The carrying amounts of
No Impact on
subsidiary Q’s assets and liabilities
at 1 January 2010 are the same in
both parent ’s (consolidated) Subsidiary ‘s
opening Ind-AS statement of
financial position and subsidiary Statements of
‘s financial statements (except for
adjustments for consolidation Financial
procedures) and are based on
subsidiary’s date of transition to
Position.
Ind-ASs

79
 VE : Compound financial instruments

For Example, Convertible debenture ,

such instruments need not be separated
in two portions if the liability component
is no longer outstanding at the date of
transition to Ind-ASs – Such separation
is required IF & ONLY IF conversion is
pending.

80
 Designation of previously recognised
financial instruments

D 19 A An entity may designate a financial asset as measured at
fair value through profit or loss in accordance with Ind AS 109
on the basis of the facts and circumstances that exist at the date
of transition to Ind ASs.

D19B An entity may designate an investment in an equity
instrument as at fair value through other comprehensive income
in accordance with Ind AS 109 on the basis of the facts and
circumstances that exist at the date of transition to Ind ASs.

D19C For a financial liability that is designated as a financial
liability at fair value through profit or loss, an entity shall
determine whether the treatment prescribed Ind AS 109 would
create an accounting mismatch in profit or loss on the basis of
the facts and circumstances that exist at the date of transition to
Ind ASs.

81
 VE : Decommissioning Liabilities
included in cost of PPE
 A first-time adopter need not comply with the Appendix A to Ind-As
16 re any changes that occurred before date of transition.

 If exemption used:

 Measure liability at date of transition in accordance with Ind-AS 37.

 Estimate amount that would have been included in Non Current

Asset when liability first arose. Discount using rate applicable to the
intervening period.

 Calculate accumulated depreciation at date of transition based on

the above amount.

82 Example next Slide

 VE : Decommissioning Liabilities
included in cost of PPE
 For Example Plant set up on 1.4.2005. Date of Transition 1.4.2010

Estimated liability on 1.4.2010 Rs. 1,000

Estimated Life 20 Years , PV of Rs. 1,000 , on 1.4.2010 .. Rs. 481.00

Discounting it back to 1.4.2005 Rs. 377.00 ( Dep 377/20)

Entry

Debit PPE … Rs. 377

Debit Retained Earnings AD Rs. 94
Debit Retained Earnings Interest Rs. 104
Credit Accumulated Depreciation Rs. 94
Credit Decommissioning Liability Rs. 377
83Credit D C L Rs. 104
 VE : Appendix C to Ind AS 115 & Ind-AS 23

Financial assets or intangible assets accounted

for in accordance with Appendix C – Service
Concession arrangement .

And

Borrowing costs

An entity MAY apply transition provisions.

84
Revenue from contracts with customers

A first-time adopter may use one or more of the following practical

expedients when applying Ind AS 115 retrospectively:

(a) for completed contracts, an entity need not restate contracts that
begin and end within the same annual reporting period;

(b) for completed contracts that have variable consideration, an entity
may use the transaction price at the date the contract was completed
rather than estimating variable consideration amounts in the
comparative reporting periods; and

(c) for all reporting periods presented before the beginning of the first
Ind AS reporting period, an entity need not disclose the amount of the
transaction price allocated to the remaining performance obligations
and an explanation of when the entity expects to recognise that amount
as revenue.

85
 VE :Designation of previously recognised
financial instruments

At the date of transition an entity may classify

previously designated Financial Instruments :

(a) As an available-for-sale ; or

(b) As financial asset or financial liability as at

fair value through profit or loss provided the
asset or liability meets the criteria in Ind-As 109.

86
 Exemptions for business combinations

A first-time adopter may elect not to apply Ind-AS

103 retrospectively to past business combinations
that occurred before the date of transition.
But if any business combination is restated to
comply with Ind-AS 103 all later business
combinations shall be restated and entity shall
also apply from that same date.
The exemption for past business combinations
also applies to past acquisitions of investments in
associates and of interests in joint ventures.

87
 If Ind-AS 103 is not applied retrospectively.

1.The FTA should preserve the same

Classification

= as an acquisition by legal acquirer

= a reverse acquisition by the legal acquiree,
= or a uniting of interests.

as in its previous GAAP financial statements.

88
If Ind-AS 103 is not applied retrospectively.

2. Recognise all its assets and liabilities at the date of transition

to Ind-ASs that were acquired or assumed in a past business
combination, EXCEPT

(i) Financial assets and Financial liabilities derecognised in

accordance with previous GAAP – covered by mandatory
exceptions ; and

(ii) assets, including goodwill, and liabilities that were not

recognised in the acquirer’s consolidated statement of financial
position in accordance with previous GAAP and also would not
qualify for recognition in accordance with Ind-ASs in the
separate statement of financial position of the acquiree.
89 Continued…………
If Ind-AS 103 is not applied retrospectively.

(iii)shall recognise any resulting change by

adjusting retained earnings

or, if appropriate, another category of equity,

unless the change results from the recognition of

an intangible asset that was previously subsumed
within goodwill.

90
Ind-AS 103 is not applied retrospectively Derecognise

Account for the All other resulting

As adjustment Resulting Change changes in
from from retained
Goodwill earnings.*
If past business combination
accounted as an acquisition and If Intangible asset
recognised as an intangible asset .It not subsumed in
shall reclassify that item and, if any, Goodwill and if
the related deferred tax and non-
goodwill not
controlling interests as part of
goodwill (unless it deducted deducted directly
goodwill directly from equity in from equity
accordance with previous GAAP.

91
 Goodwill ----
----Shall be at carrying amount in accordance
with previous GAAP at the date of transition
subject to following adjustments :

(i) increased by reclassification of Intangible

asset or

(ii) Decreased upon recognition of Intangible

Asset subsumed in goodwill and if applicable
adjust deferred tax and non controlling interest.

Goodwill be tested for impairment regardless

92 of indicators.
 Goodwill - Following adjustments not made

(i) to exclude in process research and development

acquired in that business combination * unless
related to Ind-AS 38.

(ii) to adjust previous amortisation of goodwill;

(iii) to reverse adjustments to goodwill that Ind-AS

103 would not permit, but were made in accordance
with previous GAAP because of adjustments to
assets and liabilities between the date of the business
combination and the date of transition to Ind-ASs.
93
 Goodwill Under
Previous GAAP

Intangible Assets (IA)

DOES Not Qualify
Under Ind-AS

IA Recognised Under
Ind-AS

Impairment Loss
Goodwill Under
94 Ind-AS
 Ind-AS 12 Income Taxes

IG5 An entity applies Ind-AS 12 to temporary

differences between the carrying amount of
the assets and liabilities in its opening Ind-AS
statement of financial position and
their tax bases.

95
 Extinguishing financial liabilities with
equity instruments

D25 A first-time adopter may apply the

Appendix E of Ind AS 109 Extinguishing
Financial Liabilities with Equity Instruments
from the date of transition to Ind ASs.

96
 Joint arrangements

Joint ventures - transition from proportionate

consolidation to the equity method

Joint operations—transition from the equity method

to accounting for assets and liabilities

Transition provisions in an entity’s separate financial

statements

97
 Non-current assets held for sale and
discontinued operations
Ind AS 105 requires non-current assets (or disposal groups) that meet the
criteria to be classified as held for sale, non-current assets (or disposal
groups) that are held for distribution to owners and operations that meet
the criteria to be classified as discontinued and carried at lower of its
carrying amount and fair value less cost to sell on the initial date of such
identification. A first time adopter can:

(a) measure such assets or operations at the lower of carrying value and
fair value less cost to sell at the date of transition to Ind ASs in
accordance with Ind AS 105; and

(b) recognise directly in retained earnings any difference between that

amount and the carrying amount of those assets at the date of transition
to Ind ASs determined under the entity’s previous GAAP.

98
 Stripping costs in the production phase of a surface
mine
D32 A first-time adopter may apply the Appendix B of Ind AS 16 Stripping
Costs in the Production Phase of a Surface Mine from the date of transition to
Ind ASs. As at transition date to Ind ASs, any previously recognised asset
balance that resulted from stripping activity undertaken during the
production phase (‘predecessor stripping asset’) shall be reclassified as a
part of an existing asset to which the stripping activity related, to the
extent that there remains an identifiable component of the ore body with
which the predecessor stripping asset can be associated.

Such balances shall be depreciated or amortised over the remaining

expected useful life of the identified component of the ore body to which
each predecessor stripping asset balance relates. If there is no identifiable
component of the ore body to which that predecessor stripping asset
relates, it shall be recognised in opening retained earnings at the
transition date to Ind ASs.

99
 Designation of contracts to buy
or sell a non-financial item
Ind AS 109 permits some contracts to buy or sell a non-
financial item to be designated at inception as measured at
fair value through profit or loss .Despite this requirement
an entity is permitted to designate, at the date of transition
to Ind ASs, contracts that already exist on that date as
measured at fair value through profit or loss but only if
they meet the requirements of Ind AS 109 at that date and
the entity designates all similar contracts.

100
 Ind-AS 101 :
Disclosures
The Ind-AS requires disclosures that explain
how the transition from previous GAAP to
Ind-ASs affected the entity’s reported
financial position, financial performance
and cash flow.

Discussed in details later.

101
Reconciliations of Comprehensive Income & Equity.
 Case Study
On Ind-AS 1: XYZ Limited presented its financial statements under the
national GAAP until 2009. It adopted Ind-AS from April 1, 2010 and is
required to prepare an opening Ind-AS balance sheet as at April 1, 2010.
In preparing the Ind-AS opening balance sheet of XYZ Limited noted:

1.Under its previous GAAP, had classified proposed dividend of Rs.5,00,000 as a

current liability.

2.It had not made a provision for warranty of Rs. 200,000 in the financial
statements presented under previous GAAP since the concept of
“constructive obligation” was not recognized under its previous GAAP.

3.In arriving at the amount to be capitalized as part of costs necessary to

bring an asset to its working condition, XYZ Limited had not included
Professional fees of Rs. 300,000 paid to architects at the time when the
building it currently occupies as its head office was being constructed.
Required:
Advise XYZ Limited on the treatment of all the above items under Ind-AS1
102
Solution :

In order to prepare the opening Ind-AS balance sheet at April 1, 2010,
XYZ Limited would need to make these adjustments to its balance sheet
at March 31, 2009, presented under its previous GAAP:
1. AS 10 does not allow proposed dividend to be recognized as a liability;
instead, under the latest revision to IAS 10, they should be disclosed in
footnotes. Previous Indian GAAP allowed proposed dividend to be
treated as current liability. Therefore proposed dividend of Rs.500,000
should be disclosed in footnotes.
2. IAS 37 requires recognition of a provision for warranty but Previous
Indian GAAP did not allow a similar treatment. Thus, a provision for
warranty of Rs.200,000 should be recognized under Ind-AS-37.
3. IAS 16 requires all directly attributable costs of bringing an asset to its
working condition for its intended use to be capitalized as part of
carrying cost of property, plant and equipment. Thus Rs.300,000 of
architects’ fees should be capitalized as part of (i.e., used in measurement
of) property, plant and equipment under Ind-AS.

103
 Disclosures

How Reported Financial Position , i.e.,

Transition form Balance Sheet
previous
GAAP to Ind- Financial Performance , i.e.,
Profit or loss Account and
AS affected
entity’s Cash Flows

104
 To Comply followings are required.
Reconciliations of Equity at two dates at;
( i) the date of the transition, and; ( 1st April,2015)
(ii) the end of the latest period presented in the entity’s
most recent annual financial statements in accordance
with previous GAAP. (31st March,2016)

Reconciliation of Total Comprehensive Income in

accordance with Ind-ASs for the latest period in the
entity’s most recent annual financial statements.

105
 Disclosures : Do Not Confuse
Non-Ind-AS comparative information and
historical summaries should be properly identified
and an entity shall :

(a) label the previous GAAP information

prominently as not being prepared in accordance
with Ind-ASs; and

(b) disclose the nature of the main adjustments that

would make it comply with Ind-ASs.
No onus to quantify those adjustments.
106
 Disclosures : Separate effects of Errors
From Changes

If an entity becomes aware of errors

made under previous GAAP, the
reconciliations required by
paragraph 24(a) and (b) shall
distinguish the correction of those
errors from changes in accounting
policies.
107
 Disclosure : Reversal of impairment losses
If the entity recognised or reversed any impairment
losses for the first time in preparing its opening Ind-AS
statement of financial position,

the disclosures that Ind-AS 36 Impairment of Assets would

have required if the entity

had recognised those impairment losses or reversals in

the period beginning with the date of transition to Ind-
ASs. (Ind-AS1.24(c))

108
 Disclosures : Designation of financial assets
or financial liabilities
Classification Under I GAAP Classification under Ind-AS ( D.19)

Financial Assets or Financial Either

Financial Assets or Financial Liabilities
Liability through profit or loss accounts
OR
Available for sale

In that case disclose the fair value of financial assets or

financial liabilities designated into each category at the date
of designation and their classification and carrying amount
in the previous financial statements.

109
 Disclosures: Use of fair value as deemed cost

Fair Value

Plant ,
Property &
Intangible Investment
Equipment Assets Property

Disclose, for each line item in the opening

Ind-AS statement of financial position:
(a) the aggregate of those fair values; and
(b) the aggregate adjustment to the carrying
amounts reported under previous GAAP.
Prepared & Presented By CA Yagnesh Desai
110 yagnesh@caymd.com
Disclosure : Use of deemed cost for investments in
subsidiaries, jointly controlled entities and associates

Disclose:
(a) the aggregate deemed cost of those investments
for which deemed cost is their previous GAAP
carrying amount;

(b) the aggregate deemed cost of those investments

for which deemed cost is fair value; and

(c) the aggregate adjustment to the carrying

amounts reported under previous GAAP.

111
 Disclosure : Interim financial reports

(i) Equity

A reconciliation of its equity in

accordance with previous GAAP at
the end of that comparable interim
period to its equity under Ind-ASs at
that date
112
 Disclosure :Interim financial reports – (ii)
Comprehensive Income
A reconciliation to its total comprehensive
income in accordance with Ind-ASs for that
comparable interim period (current and year to
date).

The starting point for that reconciliation shall

be total comprehensive income in accordance
with previous GAAP for that period or, if an
entity did not report such a total, profit or loss
in accordance with previous GAAP.
113
 Questions
&
Answers

Thank You

114