Indian Accounting Standards

Indian Accounting Standards

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Indian Accounting Standard (Ind AS) 101
First-time Adoption of Indian
Accounting Standards
Contents
Paragraphs
OBJECTIVE 1
SCOPE 2–5
RECOGNITION AND MEASUREMENT 6–19
Opening Ind-AS Balance Sheet 6
Accounting policies 7–12
Exceptions to the retrospective application of
other Ind-ASs 13–17
Estimates 14–17
Exemptions from other Ind-ASs 18–19
PRESENTATION AND DISCLOSURE 20–33
Comparative information 21–22
Non-Ind-AS comparative information and historical summaries 22
Explanation of transition to Ind-ASs 23–33
Reconciliations 24–28
Designation of financial assets or financial liabilities 29-29A
Use of fair value as deemed cost 30
Use of deemed cost for investments in subsidiaries,
jointly controlled entities and associates 31
Use of deemed cost for oil and gas assets 31A
Interim financial reports 32–33
Indian Accounting Standards
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APPENDICES
A Defined terms
B Exceptions to the retrospective application of other Ind-ASs
C Exemptions for business combinations
D Exemptions from other Ind-ASs
E Short-term exemptions from Ind-ASs
F Implementation Guidance
I Comparison with IFRS 1, First-time Adoption of International
Financial Reporting Standards
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First-time Adoption of Indian Accounting Standards
Indian Accounting Standard (Ind AS) 101
First-time Adoption of Indian
Accounting Standards
(This Indian Accounting Standard includes paragraphs set in bold type
and plain type, which have equal authority. Paragraphs in bold type
indicate the main principles.)
Objective
1 The objective of this Indian Accounting Standard (Ind AS) is 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 Ind-ASs; and
(c) can be generated at a cost that does not exceed the benefits.
Scope
2 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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3 An entity’s first Ind-AS financial statements are the first annual
financial statements in which the entity adopts Ind-ASs, in accordance
with Ind-ASs notified under the Companies Act, 1956 and makes an
explicit and unreserved statement in those financial statements of
compliance with Ind-ASs.
4 [Refer to Appendix 1]
5 This Indian Accounting Standard does not apply to changes in
accounting policies made by an entity that already applies Ind-ASs.
Such changes are the subject of:
(a) requirements on changes in accounting policies in Ind AS 8
Accounting Policies, Changes in Accounting Estimates and
Errors; and
(b) specific transitional requirements in other Ind-ASs.
Recognition and measurement
Opening Ind-AS Balance Sheet
6 An entity shall prepare and present an opening Ind-AS Balance
Sheet at the date of transition to Ind-ASs. This is the starting point for
its accounting in accordance with Ind-ASs.
Accounting policies
7 An entity shall use the same accounting policies in its opening
Ind-AS Balance Sheet and throughout all periods presented in its
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, except as specified in paragraphs 13–19 and
Appendices B–E.
8 An entity shall not apply different versions of Ind-ASs that were
effective at earlier dates. An entity may apply a new Ind-AS that is not
yet mandatory if that Ind-AS permits early application.
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First-time Adoption of Indian Accounting Standards
Example: Consistent application of latest version of Ind-ASs
Background
The end of entity A’s first Ind-AS reporting period is 31 March 2014.
Entity A presented financial statements in accordance with its
previous GAAP annually to 31 March each year up to, and including,
31 March 2013.
Application of requirements
Entity A is required to apply the Ind-ASs effective for financial year/
periods ending on 31 March 2014 in:
(a) preparing and presenting its opening Ind-AS Balance Sheet as
at 1 April 2013 which is the date of transition to Ind-AS; and
(b) preparing and presenting its Balance Sheet as at 31 March
2014,statement of profit and loss and statement of cash flows
for the year ending 31 March 2014 and disclosures.
If Entity A; decides to present comparative information in those
financial statements for one year (see paragraph 21).the requirements
apply as follows:
Entity A is required to apply the Ind-ASs effective for financial year/
periods ending on 31 March 2014 in:
(a) preparing and presenting its opening Ind-AS Balance Sheet as
at 1 April, 2012 on a memorandum basis for compilation of
comparative period financial statements assuming that deemed
date of transition is April 1, 2012; and
(b) preparing and presenting its opening Ind-AS Balance Sheet as
at 1 April 2013 which is the date of transition to Ind-AS
(c) preparing and presenting its Balance Sheet as at 31 March
2014 (including comparative amounts for 31 March, 2013),
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statement of profit and loss and statement of cash flows for the
year ending 31 March 2014 (including comparative amounts for
corresponding periods of year ending 31 March, 2013) and
disclosures (including comparative information for previous
period).
If a new Ind-AS is not yet mandatory but permits early application,
entity A is permitted, but not required, to apply that Ind-AS in its first
Ind-AS financial statements.
9 The transitional provisions in other Ind-ASs apply to changes in
accounting policies made by an entity that already uses Ind-ASs; they
do not apply to a first-time adopter’s transition to Ind-ASs, except as
specified in Appendices B–E.
10 Except as described in paragraphs 13–19 and Appendices B–E,
an entity shall, in its opening Ind-AS Balance Sheet:
(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 in accordance with
previous GAAP as one type of asset, liability or component
of equity, but are a different type of asset, liability or
component of equity in accordance with Ind-ASs; and
(d) apply Ind-ASs in measuring all recognised assets and
liabilities.
11 The accounting policies that an entity uses in its opening Ind-AS
Balance Sheet may differ from those that it used for the same date
using its previous GAAP. The resulting adjustments arise from events
and transactions before the date of transition to Ind-ASs. Therefore, an
entity shall recognise those adjustments directly in retained earnings
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First-time Adoption of Indian Accounting Standards
(or, if appropriate, another category of equity) at the date of transition
to Ind-ASs.
12 This Indian Accounting Standard establishes two categories of
exceptions to the principle that an entity’s opening Ind-AS Balance Sheet
shall comply with each Ind-AS:
(a) paragraphs 14–17 and Appendix B prohibit retrospective
application of some aspects of other Ind-ASs.
(b) Appendices C–E grant exemptions from some requirements
of other Ind-ASs.
Exceptions to the retrospective application of other
Ind-ASs
13 This Indian Accounting Standard prohibits retrospective application
of some aspects of other Ind-ASs. These exceptions are set out in
paragraphs 14–17 and Appendix B.
Estimates
14 An entity’s 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.
15 An entity may receive information after the date of transition to
Ind-ASs about estimates that it had made under previous GAAP. In
accordance with paragraph 14, an entity shall treat the receipt of that
information in the same way as non-adjusting events after the reporting
period in accordance with Ind AS 10 Events after the Reporting Period.
For example, assume that an entity’s date of transition to Ind-ASs is 1
April 2011 and new information on 15 May 2011 requires the revision of
an estimate made in accordance with previous GAAP at 31 March 2011.
The entity shall not reflect that new information in its opening Ind-AS
Balance Sheet (unless the estimates need adjustment for any differences
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in accounting policies or there is objective evidence that the estimates
were in error). Instead, the entity shall reflect that new information in
profit or loss (or, if appropriate, other comprehensive income) for the
year ended 31 March 2012.
16 An entity may need to make estimates in accordance with Ind-
ASs at the date of transition to Ind-ASs that were not required at that
date under previous GAAP. To achieve consistency with Ind AS 10,
those estimates in accordance with Ind-ASs shall reflect conditions that
existed at the date of transition to Ind-ASs. In particular, estimates at
the date of transition to Ind-ASs of market prices, interest rates or
foreign exchange rates shall reflect market conditions at that date.
17 Paragraphs 14–16 apply to the opening Ind-AS Balance Sheet.
In addition, they also apply to a comparative period presented in an
entity’s first Ind-AS financial statements, where an entity decides to
present comparative information in those financial statements for one
year (see paragraph 21), in which case the references to the date of
transition to Ind-ASs are replaced by references to the end of that
comparative period.
Exemptions from other Ind-ASs
18 An entity may elect to use one or more of the exemptions
contained in Appendices C–E. An entity shall not apply these exemptions
by analogy to other items.
19 Some exemptions in Appendices C–E refer to fair value. In
determining fair values in accordance with this Ind-AS, an entity shall
apply the definition of fair value in Appendix A and any more specific
guidance in other Ind-ASs on the determination of fair values for the
asset or liability in question. Those fair values shall reflect conditions
that existed at the date for which they were determined.
Presentation and disclosure
20 This Indian Accounting Standard does not provide exemptions
from the presentation and disclosure requirements in other Ind-ASs.
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First-time Adoption of Indian Accounting Standards
Comparative information
21 To comply with Ind AS 1, an entity’s first Ind-AS financial
statements shall include at least three Balance Sheets (including two
statements of changes in equity), two statements of profit and loss, two
statements of cash flows and related notes for those periods. However,
in accordance with this Ind-AS, a first time adopter need not provide
the corresponding previous period financial statements in accordance
with Ind-AS when it reports its first Ind-AS financial statements.
Irrespective of any of the following two options elected, in terms of this
Ind AS the first time adopter shall present latest corresponding previous
periods’ financial statements prepared as per the previous GAAP when
presenting its first Ind-AS financial statements:
(a) The first Ind-AS financial statements includes only two
Balance Sheets (including one statement of changes in
equity) and one statement of profit and loss, one statement
of cash flows and related notes for the financial year
prepared under Ind-AS. This first Ind-AS financial statements
would include the previous years’ comparative figures as
per the previous GAAP. For example, a first time adopter
for whom the first reporting period is financial statements
for the year ending March 31, 2012 would only provide two
Balance Sheets (including one statement of changes in
equity ) i.e. April 1, 2011 and March 31, 2012 and one
statement of profit and loss, one statement of cash flows
and related notes for the financial year ending March 31,
2012, accompanied by reclassified previous years financial
statements for the year ending March 31, 2011 as per the
previous GAAP to the extent practicable, or
(b) In addition to (a) above, voluntarily provide the previous
years’ comparatives corresponding to the first Ind-AS
financial statements also under Ind-AS on a memorandum
basis. Only for compilation of previous years comparative
financial statements under Ind-ASs on a memorandum basis
the entity shall assume that the deemed date of transition
as at the beginning of the comparative period. For example,
the first time adopter for whom the first reporting period is
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financial statements for the year ending March 31, 2012
would provide four Balance Sheets (including two statements
of changes in equity) i.e. April 1, 2010, March 31, 2011,
April 1, 2011 and March 31, 2012, two statements of profit
and loss, two statements of cash flows and related notes
i.e. for the financial year ending March 31, 2012 and for the
corresponding comparative period under Ind-AS. In addition,
the first Ind-AS financial statements would include the
reclassified financial statements of the entity for the year
ending March 31, 2011 as per the previous GAAP to the
extent practicable.
An entity’s comparative financial statements under Ind-ASs
should:
i. Apply consistent accounting policies for the first Ind-
AS financial statements and comparative period
ii. Apply the optional exemptions (set out in Appendices
C-E) andexceptions (set out in paragraph 14-17 and
Appendix B) consistently both as at the date of
transition, i.e, beginning date of the financial year for
which an entity presents financial information under
Ind-ASs and deemed date of transition, i.e, beginning
date of the comparative financial year for which an
entity presents financial information under Ind-ASs. For
example, the first time adopter for whom the first
reporting period is financial statements for the year
ending March 31, 2012 would apply the exceptions
and exceptions as at April 1, 2010 and April 1, 2011;
accordingly the Balance Sheet as at end of March 31,
2011 may not be equivalent to the opening Balance
Sheet as at April 1, 2011.
Non-Ind-AS comparative information and historical summaries
22 [Refer to Appendix 1]
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First-time Adoption of Indian Accounting Standards
Explanation of transition to Ind-ASs
23 An entity shall explain how the transition from previous GAAP
to Ind-ASs affected its reported Balance Sheet, financial
performance and cash flows.
Reconciliations
24 To comply with paragraph 23, an entity’s first Ind-AS financial
statements shall include:
(a) reconciliation of its equity reported in accordance with Ind-
ASs to its equity in accordance with previous GAAP on the
date of transition to Ind-ASs.
(b) significant differences between previous GAAP and Ind-AS
in respect of its total comprehensive income (or if it did not
report such a total, profit or loss).
For example, a first time adopter for whom the first reporting
period as per Ind-AS is year ending March 31, 2012; would
provide significant differences explaining the impact on the
total comprehensive income for the year ending on that date
arising from adoption of the Ind-AS.
(c) if the entity recognised or reversed any impairment losses
for the first-time in preparing its opening Ind-AS Balance
Sheet, 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.
(d) where however, an entity decides to provide one year
comparative information in accordance with paragraph 21(b)
of this Ind-AS then instead of disclosures in (b) above such
an entity shall provide
i. a reconciliation of its equity in accordance with Ind-
AS as at deemed date of transition, i.e, beginning of
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the comparative financial year for which an entity
presents financial information under Ind-ASs to its
equity reported in accordance with previous GAAP;
ii. a reconciliation of its equity in accordance with Ind-
AS as at the end of the comparative period presented
to its equity reported in accordance with previous
GAAP; and
iii. a reconciliation of its total comprehensive income in
accordance with Ind-AS compiled on a memorandum
basis to its total comprehensive income (or if it did
not report such a total, profit or loss) in accordance
with previous GAAP for the comparative period.
For example, a first time adopter for whom the first reporting period as
per Ind-AS is year ending March 31, 2012 along with one year
comparative in accordance with paragraph 21(b) of this Ind-AS would
provide a reconciliation explaining the impact on the total comprehensive
income for the year ending March 31, 2011 and on the equity as at
April 1, 2010 and March 31, 2011 arising from adoption of the Ind-AS.
The equity in accordance as at March 31, 2011 may not be equal to the
equity as at April 1, 2011 because the comparatives financial under
Ind-AS would be compiled on a memorandum basis based on the
assumption that the deemed date of transition for the comparative period
would be April 1, 2010 where as the date of transition for the year
ended March 31, 2012 will be April 1, 2011
25 The disclosures required by paragraphs 24(a),(b) and (d) shall
give sufficient detail to enable users to understand the material
adjustments to the Balance Sheet and statement of profit and loss. If
an entity presented a statement of cash flows under its previous GAAP,
it shall also explain the material adjustments to the statement of cash
flows.
26 If an entity becomes aware of errors made under previous GAAP,
the disclosures required by paragraphs 24(a),(b) and (d) shall distinguish
the correction of those errors from changes in accounting policies.
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First-time Adoption of Indian Accounting Standards
27 Ind AS 8 does not apply to changes in accounting policies an
entity makes when it adopts Ind-ASs or to changes in those policies
until after it presents its first Ind-AS financial statements. Therefore,
Ind AS 8’s requirements about changes in accounting policies do not
apply in an entity’s first Ind-AS financial statements.
27A If during the period covered by its first Ind-AS financial statements
an entity changes its accounting policies or its use of the exemptions
contained in this Ind-AS, it shall explain the changes between its first
Ind-AS interim financial report and its first Ind-AS financial statements,
in accordance with paragraph 23, and it shall update the disclosures
required by paragraph 24(a), (b) and (d).
27B If an entity adopts the first time exemption option provided in
accordance with paragraph D7A, the fact and the accounting policy
shall be disclosed by the entity until such time that significant block of
such assets is fully depreciated or derecognised from the entity’s
Balance Sheet.
28 If an entity did not present financial statements for previous
periods, its firstInd-AS financial statements shall disclose that fact.
Designation of financial assets or financial liabilities
29 An entity is permitted to designate a previously recognised
financial asset or financial liability as a financial asset or financial liability
at fair value through profit or loss or a financial asset as available for
sale in accordance with paragraph D19. The entity shall 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.
Use of fair value as deemed cost
30 If an entity uses fair value in its opening Ind-AS Balance Sheet
as deemed cost for an item of property, plant and equipment, an
investment property or an intangible asset (see paragraphs D5 and
D7), the entity’s first Ind-AS financial statements shall disclose, for
each line item in the opening Ind-AS Balance Sheet:
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(a) the aggregate of those fair values; and
(b) the aggregate adjustment to the carrying amounts reported
under previous GAAP
Use of deemed cost for investments in subsidiaries, jointly
controlled entities and associates
31 Similarly, if an entity uses a deemed cost in its opening Ind-AS
Balance Sheet for an investment in a subsidiary, jointly controlled entity
or associate in its separate financial statements (see paragraph D15),
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.
Use of deemed cost for oil and gas assets
31A If an entity uses the exemption in paragraph D8A(b) for oil and
gas assets, it shall disclose that fact and the basis on which carrying
amounts determined under previous GAAP were allocated.
Use of deemed cost for operations subject to rate regulation
31B If an entity uses the exemption in paragraph D8B for operations
subject to rate regulation, it shall disclose that fact and the basis on
which carrying amounts were determined under previous GAAP.
Interim financial reports
32 To comply with paragraph 23, if an entity presents an interim
financial report in accordance with Ind AS 34 for part of the period
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First-time Adoption of Indian Accounting Standards
covered by its first Ind-AS financial statements, the entity shall provide
either of the following disclosures in addition to the requirements of Ind
AS 34:
(a) where, an entity decides not to provide one year comparative
period in accordance with paragraph 21(a) of this Ind-AS:
provide the disclosures described in paragraph 24(a) and
24(b) for the part period and year to date covered by its
first Ind-AS financial statements (supplemented by the
details required by paragraphs 25 and 26) or a crossreference
to another published document that includes these
disclosures; or
(b) where, an entity decides to provide one year comparative
period in accordance with paragraph 21(b) of this Ind-AS:
provide
i. the reconciliations described in paragraph 24(a)
(supplemented by the details required by paragraphs
25 and 26) or a cross-reference to another published
document that includes these reconciliations.
ii. a reconciliation of its equity in accordance with Ind-
AS as at deemed date of transition, i.e, beginning of
the comparative interim period for which an entity
presents financial information under Ind-ASs to its
equity reported in accordance with previous GAAP;
iii. a reconciliation of its equity in accordance with Ind-
AS at the end of that comparable interim period to its
equity in accordance with previous GAAP at that date;
and
iv. a reconciliation of total comprehensive income in
accordance with Ind-AS compiled on a memorandum
basis with its total comprehensive income (or if it did
not report such a total, profit or loss) in accordance
with previous GAAP for that comparable interim period
(current and year to date).
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(c) Refer to Appendix 1)
32A 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 32(a) or 32(b).
33 Ind AS 34 requires minimum disclosures, which are based on the
assumption that users of the interim financial report also have access
to the most recent annual financial statements. However, Ind AS 34
also requires an entity to disclose ‘any events or transactions that are
material to an understanding of the current interim period’. Therefore, if
a first-time adopter did not, in its most recent annual financial statements
in accordance with previous GAAP, disclose information material to an
understanding of the current interim period, its interim financial report
shall disclose that information or include a cross-reference to another
published document that includes it.
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First-time Adoption of Indian Accounting Standards
Appendix A
Defined terms
This appendix is an integral part of this Ind-AS.
date of transition The beginning date of financial year on or
to Ind-AS after 1 April 2011 for which an entity
presents financial information under Ind-ASs
in its first Ind-AS financial statements.
deemed cost An amount used as a surrogate for cost or
depreciated cost at a given date.
Subsequent depreciation or amortisation
assumes that the entity had initially
recognised the asset or liability at the given
date and that its cost was equal to the
deemed cost.
fair value The amount for which an asset could be
exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s
length transaction.
first Ind-AS financial The first annual financial statements in
statements which an entity adopts Indian Accounting
Standards (Ind-ASs), by an explicit and
unreserved statement of compliance with
Ind-ASs.
first Ind-AS reporting The latest reporting period covered by an
period entity’s first Ind-AS financial statements.
first-time adopter An entity that presents its first Ind-AS
financial statements.
Indian Accounting Standards
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Indian Accounting Indian Accounting Standards are Accounting
Standards (Ind-ASs) Standards prescribed under Section 211(3C)
of the Companies Act, 1956.
opening Ind-AS An entity’s Balance Sheet at the date of
Balance Sheet transition to Ind-AS
previous GAAP The basis of accounting that a first-time
adopter used immediately before adopting
Ind-ASs for its reporting requirements in
India. For instance, for companies preparing
their financial statements in accordance with
the existing Accounting Standards notified
under the Companies (Accounting
Standards) Rules, 2006 shall consider those
financial statements as previous GAAP
financial statements.
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First-time Adoption of Indian Accounting Standards
Appendix B
Exceptions to the retrospective application of
other Ind-ASs
This appendix is an integral part of this Ind-AS.
B1 An entity shall apply the following exceptions:
(a) derecognition of financial assets and financial liabilities
(paragraphs B2 and B3);
(b) hedge accounting (paragraphs B4–B6); and
(c) non-controlling interests (paragraph B7)
Derecognition of financial assets and financial
liabilities
B2 Except as permitted by paragraph B3, a first-time adopter shall
apply the derecognition requirements in Ind AS 39 Financial Instruments:
Recognition and Measurement prospectively for transactions occurring
on or after date of transition to Ind-AS. In other words, if a first-time
adopter derecognised non-derivative financial assets or non-derivative
financial liabilities in accordance with its previous GAAP as a result of
a transaction that occurred before date of transition to Ind-AS, it shall
not recognise those assets and liabilities in accordance with Ind-ASs
(unless they qualify for recognition as a result of a later transaction or
event).
B3 Notwithstanding paragraph B2, an entity may apply the
derecognition requirements in Ind AS 39 retrospectively from a date of
the entity’s choosing, provided that the information needed to applyInd
AS 39 to financial assets and financial liabilities derecognised as a
result of past transactions was obtained at the time of initially accounting
for those transactions.
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Hedge accounting
B4 As required by Ind AS 39, at the date of transition to Ind-ASs, an
entity shall:
(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.
B5 An entity shall not reflect in its opening Ind-AS Balance Sheet a
hedging relationship of a type that does not qualify for hedge accounting
in accordance with Ind AS 39 (for example, many hedging relationships
where the hedging instrument is a cash instrument or written option;
where the hedged item is a net position; or where the hedge covers
interest risk in a held-to-maturity investment). However, if an entity
designated a net position as a hedged item in accordance with previous
GAAP, it may designate an individual item within that net position as a
hedged item in accordance with Ind-ASs, provided that it does so no
later than the date of transition to Ind-ASs.
B6 If, before the date of transition to Ind-ASs, an entity had
designated a transaction as a hedge but the hedge does not meet the
conditions for hedge accounting in Ind AS 39, the entity shall apply
paragraphs 91 and 101 of Ind AS 39 to discontinue hedge accounting.
Transactions entered into before the date of transition to Ind-ASs shall
not be retrospectively designated as hedges.
Non-controlling interests
B7 A first-time adopter shall apply the following requirements of Ind
AS 27 prospectively from the date of transition to Ind-ASs:
(a) the requirement in paragraph 28 that total comprehensive
income is attributed to the owners of the parent and to the
non-controlling interests even if this results in the noncontrolling
interests having a deficit balance;
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First-time Adoption of Indian Accounting Standards
(b) the requirements in paragraphs 30 and 31 for accounting
for changes in the parent’s ownership interest in a subsidiary
that do not result in a loss of control; and
(c) the requirements in paragraphs 34–37 for 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.
However, if a first-time adopter elects to apply Ind AS 103 Business
Combinations retrospectively to past business combinations, it shall
also apply Ind AS 27 in accordance with paragraph C1 of this Ind-AS.
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Appendix C
Exemptions for business combinations
This appendix is an integral part of this Ind-AS. An entity shall apply
the following requirements to business combinations that the entity
recognised before the date of transition to Ind-ASs.
C1 A first-time adopter may elect not to apply Ind AS 103 Business
Combinations retrospectively to past business combinations (business
combinations that occurred before the date of transition to Ind-ASs).
However, if a first-time adopter restates any business combination to
comply with Ind AS 103, it shall restate all later business combinations
and shall also apply Ind AS 27 from that same date. For example, if a
first-time adopter elects to restate a business combination that occurred
on 30 June 2006, it shall restate all business combinations that occurred
between 30 June 2006 and the date of transition to Ind-ASs, and it
shall also apply Ind AS 27 from 30 June 2006.
C2 An entity need not apply Ind AS 21 The Effects of Changes in
Foreign Exchange Rates retrospectively to fair value adjustments and
goodwill arising in business combinations that occurred before the date
of transition to Ind-ASs. If the entity does not apply Ind AS 21
retrospectively to those fair value adjustments and goodwill, it shall
treat them as assets and liabilities of the entity rather than as assets
and liabilities of the acquiree. Therefore, those goodwill and fair value
adjustments either are already expressed in the entity’s functional
currency or are non-monetary foreign currency items, which are reported
using the exchange rate applied in accordance with previous GAAP.
C3 An entity may apply Ind AS 21 retrospectively to fair value
adjustments and goodwill arising in either:
(a) all business combinations that occurred before the date of
transition to Ind-ASs; or
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First-time Adoption of Indian Accounting Standards
(b) all business combinations that the entity elects to restate to
comply with Ind AS 103, as permitted by paragraph C1
above.
C4 If a first-time adopter does not apply Ind AS 103 retrospectively
to a past business combination, this has the following consequences
for that business combination:
(a) The first-time adopter shall keep the same classification
(as an acquisition by the legal acquirer, a reverse acquisition
by the legal acquiree, or a uniting of interests) as in its
previous GAAP financial statements.
(b) The first-time adopter shall recognise all its assets and
liabilities at the date of transition to Ind-ASs that were
acquired or assumed in a past business combination, other
than:
(i) some financial assets and financial liabilities
derecognised in accordance with previous GAAP (see
paragraph B2); and
(ii) assets, including goodwill, and liabilities that were not
recognised in the acquirer’s consolidated Balance
Sheet in accordance with previous GAAP and also
would not qualify for recognition in accordance with
Ind-ASs in the separate Balance Sheet of the acquiree
(see (f)–(i) below).
The first-time adopter 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 (see (g)(i) below).
(c) The first-time adopter shall exclude from its opening Ind-AS
Balance Sheet any item recognised in accordance with
previous GAAP that does not qualify for recognition as an
Indian Accounting Standards
24
asset or liability under Ind-ASs. The first-time adopter shall
account for the resulting change as follows:
(i) the first-time adopter may have classified a past
business combination as an acquisition and recognised
as an intangible asset an item that does not qualify
for recognition as an asset in accordance with Ind AS
38 Intangible Assets. It shall reclassify that item (and,
if any, the related deferred tax and non-controlling
interests) as part of goodwill (unless it deducted
goodwill directly from equity in accordance with
previous GAAP, see (g)(i) and (i) below) or capital
reserve to the extent not exceeding the balance
available in that reserve.
(ii) the first-time adopter shall recognise all other resulting
changes in retained earnings1.
(d) Ind-ASs require subsequent measurement of some assets
and liabilities on a basis that is not based on original cost,
such as fair value. The first-time adopter shall measure
these assets and liabilities on that basis in its opening Ind-
AS Balance Sheet, even if they were acquired or assumed
in a past business combination. It shall recognise any
resulting change in the carrying amount by adjusting retained
earnings (or, if appropriate, another category of equity),
rather than goodwill/capital reserve.
(e) Immediately after the business combination, the carrying
amount in accordance with previous GAAP of assets
acquired and liabilities assumed in that business
combination shall be their deemed cost in accordance with
1 Such changes include reclassifications from or to intangible assets if goodwill
was not recognised in accordance with previous GAAP as an asset. This
arises if, in accordance with previous GAAP, the entity (a) deducted goodwill
directly from equity or (b) did not treat the business combination as an acquisition
or (c) recognised capital reserve in a business combination accounted for as
an acquisition and the amount of reclassification mentioned in (i) above exceeds
the balance available in that reserve.
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First-time Adoption of Indian Accounting Standards
Ind-ASs at that date. If Ind-ASs require a cost-based
measurement of those assets and liabilities at a later
date,that deemed cost shall be the basis for cost-based
depreciation or amortisation from the date of the business
combination.
(f) If an asset acquired, or liability assumed, in a past business
combination was not recognised in accordance with previous
GAAP, it does not have a deemed cost of zero in the opening
Ind-AS Balance Sheet. Instead, the acquirer shall recognise
and measure it in its consolidated Balance Sheet on the
basis that Ind-ASs would require in the Balance Sheet of
the acquiree. To illustrate: if the acquirer had not, in
accordance with its previous GAAP, capitalised finance
leases acquired in a past business combination, it shall
capitalise those leases in its consolidated financial
statements, as Ind AS 17 Leases would require the acquiree
to do in its Ind-AS Balance Sheet. Similarly, if the acquirer
had not, in accordance with its previous GAAP, recognised
a contingent liability that still exists at the date of transition
to Ind-ASs, the acquirer shall recognise that contingent
liability at that date unless Ind AS 37 Provisions, Contingent
Liabilities and Contingent Assets would prohibit its
recognition in the financial statements of the acquiree.
Conversely, if an asset or liability was subsumed in goodwill/
capital reserve in accordance with previous GAAP but would
have been recognised separately under Ind AS 103, that
asset or liability remains in goodwill/capital reserve unless
Ind-ASs would require its recognition in the financial
statements of the acquiree.
(g) The carrying amount of goodwill or capital reserve in the
opening Ind-AS Balance Sheet shall be its carrying amount
in accordance with previous GAAP at the date of transition
to Ind-ASs, after the following two adjustments:
(i) If required by (c)(i) above, the first-time adopter shall
increase the carrying amount of goodwill or decrease the
carrying amount of capital reserve when it reclassifies an
Indian Accounting Standards
26
item that it recognised as an intangible asset in
accordance with previous GAAP. Similarly, if (f) above
requires the first-time adopter to recognise an intangible
asset that was subsumed in recognised goodwill or capital
reserve in accordance with previous GAAP, the first-time
adopter shall decrease the carrying amount of goodwill or
increase the carrying amount of capital reserve accordingly
(and, if applicable, adjust deferred tax and non-controlling
interests).
(ii) Regardless of whether there is any indication that the
goodwill may be impaired, the first-time adopter shall
apply Ind AS 36 in testing the goodwill for impairment
at the date of transition to Ind-ASs and in recognising
any resulting impairment loss in retained earnings (or,
if so required by Ind AS 36, in revaluation surplus).
The impairment test shall be based on conditions at
the date of transition to Ind-ASs.
(h) No other adjustments shall be made to the carrying amount
of goodwill/capital reserve at the date of transition to Ind-
ASs. For example, the first-time adopter shall not restate
the carrying amount of goodwill/capital reserve:
(i) to exclude in-process research and development
acquired in that business combination (unless the
related intangible asset would qualify for recognition
in accordance with Ind AS 38 in the Balance Sheet of
the acquiree);
(ii) to adjust previous amortisation of goodwill;
(iii) to reverse adjustments to goodwill that Ind AS 36 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.
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First-time Adoption of Indian Accounting Standards
(i) If the first-time adopter recognised goodwill in accordance
with previous GAAP as a deduction from equity:
(i) it shall not recognise that goodwill in its opening Ind-
AS Balance Sheet. Furthermore, it shall not reclassify
that goodwill to profit or loss if it disposes of the
subsidiary or if the investment in the subsidiary
becomes impaired.
(ii) adjustments resulting from the subsequent resolution
of a contingency affecting the purchase consideration
shall be recognised in retained earnings.
(j) In accordance with its previous GAAP, the first-time adopter
may not have consolidated a subsidiary acquired in a past
business combination (for example, because the parent did
not regard it as a subsidiary in accordance with previous
GAAP or did not prepare consolidated financial statements).
The first-time adopter shall adjust the carrying amounts of
the subsidiary’s assets and liabilities to the amounts that
Ind-ASs would require in the subsidiary’s Balance Sheet.
The deemed cost of goodwill equals the difference at the
date of transition to Ind-ASs between:
(i) the parent’s interest in those adjusted carrying
amounts; and
(ii) the cost in the parent’s separate financial statements
of its investment in the subsidiary.
(k) The measurement of non-controlling interests and deferred
tax follows from the measurement of other assets and
liabilities. Therefore, the above adjustments to recognised
assets and liabilities affect non-controlling interests and
deferred tax.
C5 The exemption for past business combinations also applies to
past acquisitions of investments in associates and of interests in joint
ventures. Furthermore, the date selected for paragraph C1 applies
equally for all such acquisitions.
Indian Accounting Standards
28
Appendix D
Exemptions from other Ind-ASs
This appendix is an integral part of this Ind-AS.
D1 An entity may elect to use one or more of the following
exemptions:
(a) share-based payment transactions (paragraphs D2 and D3);
(b) insurance contracts (paragraph D4);
(c) deemed cost (paragraphs D5–D8B);
(d) leases (paragraphs D9 and D9A);
(e) employee benefits (paragraphs D10 and D11);
(f) cumulative translation differences and accumulated
exchange differences (paragraphs D12 -D13A);
(g) investments in subsidiaries, jointly controlled entities and
associates (paragraphs D14 and D15);
(h) assets and liabilities of subsidiaries, associates and joint
ventures (paragraphs D16 and D17);
(i) compound financial instruments (paragraph D18);
(j) designation of previously recognised financial instruments
(paragraph D19-D 19B);
(k) fair value measurement of financial assets or financial
liabilities at initial recognition (paragraph D20);
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First-time Adoption of Indian Accounting Standards
(l) decommissioning liabilities included in the cost of property,
plant and equipment (paragraphs D21 and D21A);
(m) financial assets or intangible assets accounted for in accordance
with Appendix A to Ind AS 11 Service Concession Arrangements
(paragraph D22);
(n) borrowing costs (paragraph D23);
(o) transfers of assets from customers (paragraph D24).
(p) extinguishing financial liabilities with equity instruments (paragraph
D25); and
(q) non-current assets held for sale and discontinued operations
(paragraph D26).
An entity shall not apply these exemptions by analogy to other items.
Share-based payment transactions
D2 A first-time adopter is encouraged, but not required, to apply Ind
AS 102 Share-based Payment to equity instruments that vested before
date of transition to Ind-ASs. However, if a first-time adopter elects to
apply Ind AS 102 to such equity instruments, it may do so only if the
entity has disclosed publicly the fair value of those equity instruments,
determined at the measurement date, as defined in Ind AS 102. For all
grants of equity instruments to which Ind AS 102 has not been applied
i.e. equity instruments vested but not settled before date of transition to
Ind-ASs, a first-time adopter shall nevertheless disclose the information
required by paragraphs 44 and 45 of Ind AS 102. If a first-time adopter
modifies the terms or conditions of a grant of equity instruments to
which Ind AS 102 has not been applied, the entity is not required to
apply paragraphs 26–29 of Ind AS 102 if the modification occurred
before the date of transition to Ind-ASs.
D3 A first-time adopter is encouraged, but not required, to apply Ind
AS 102 to liabilities arising from share-based payment transactions that
were settled before the date of transition to Ind-ASs.
Indian Accounting Standards
30
Insurance contracts
D4 An entity shall apply Ind AS 104 Insurance Contracts for annual
periods beginning on or after date of transition to Ind-AS. Earlier
application is encouraged. If an entity applies this Ind AS 104 for an
earlier period, it shall disclose that fact.
In applying paragraph 39(c)(iii), of Ind AS 104 an entity need not disclose
information about claims development that occurred earlier than five
years before the end of the first financial year in which it applies Ind AS
104. Furthermore, if it is impracticable, when an entity first applies Ind
AS 104, to prepare information about claims development that occurred
before the beginning of the earliest period for which an entity presents
information that complies with this Ind AS, the entity shall disclose that
fact.
When an insurer changes its accounting policies for insurance liabilities,
it is permitted, but not required, to reclassify some or all of its financial
assets as ‘at fair value through profit or loss’. This reclassification is
permitted if an insurer changes accounting policies when it first applies
Ind AS 104 and if it makes a subsequent policy change permitted by
paragraph 22. The reclassification is a change in accounting policy and
Ind AS 8 applies.
Deemed cost
D5 A first-time adopter may elect to measure an item of property,
plant and equipment at the date of transition to Ind-ASs at its fair value
and use that fair value as its deemed cost at that date.
D6 A first-time adopter may elect to use a previous GAAP revaluation of
an item of property, plant and equipment at, or before, the date of transition
to Ind-ASs as deemed cost at the date of the revaluation, if the revaluation
was, at the date of the revaluation, broadly comparable to:
(a) fair value; or
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First-time Adoption of Indian Accounting Standards
(b) cost or depreciated cost in accordance with Ind-ASs,
adjusted to reflect, for example, changes in a general or
specific price index.
D7 The elections in paragraphs D5 and D6 are also available for:
(a) investment property, accounted for in accordance with the
cost model in Ind AS 40 Investment Property; and
(b) intangible assets that meet:
(i) the recognition criteria in Ind AS 38 (including reliable
measurement of original cost); and
(ii) the criteria in Ind AS 38 for revaluation (including the
existence of an active market).
An entity shall not use these elections for other assets or for
liabilities.
D7A 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 and
D21A of this standard. In the financial statements of an entity where
property, plant and equipment of subsidiaries, joint ventures or
associates have been measured as per the previous GAAP for the
purpose of consolidation/equity accounting/proportionate consolidation
or equity accounting, then the amounts so used for the purpose of
consolidation/equity accounting/proportionate consolidation or equity
accounting, may be considered for the aforesaid optional exemption.
If an entity is preparing its financial statements in which its subsidiaries/
associates/jointly controlled entities are consolidated/accounted as per
the equity method/proportionately consolidated or accounted as per the
equity method for the first time and if any of its subsidiaries, jointly
controlled entities or associates has not measured property, plant and
equipment in accordance with the previous GAAP, then to that extent
Indian Accounting Standards
32
the first time adopter may recompute carrying values of the property,
plant and equipment in accordance with the principles of Ind AS 16:
Property, Plant and Equipment as on the date of transition to Ind-AS
after considering the first time adoption exemption available in this
standard for that subsidiary, jointly controlled entity or associate.
The above option can also be availed for intangible assets covered by
Ind AS 38 Intangible Assets and investment property covered by Ind AS
40 Investment Property.
D8 A first-time adopter may have established a deemed cost in
accordance with previous GAAP for some or all of its assets and
liabilities by measuring them at their fair value at one particular date
because of an event such as a privatisation or initial public offering. It
may use such event-driven fair value measurements as deemed cost
for Ind-ASs at the date of that measurement.
D8A Under some GAAPs exploration and development costs for oil
and gas properties in the development or production phases2 are
accounted for in cost centres that include all properties in a large
geographical area. A first-time adopter using such accounting under
previous GAAP may elect to measure oil and gas assets at the date of
transition to Ind-ASs on the following basis:
(a) exploration and evaluation assets at the amount determined
under the entity’s previous GAAP; and
(b) assets in the development or production phases at the
amount determined for the cost centre under the entity’s
previous GAAP. The entity shall allocate this amount to the
cost centre’s underlying assets pro rata using reserve
volumes or reserve values as of that date.
The entity shall test exploration and evaluation assets and assets
in the development and production phases for impairment at the
2 Ind AS 106, Exploration for and Evaluation of Mineral Resources, is under
consideration and may not be notified in the present form. Accordingly,
provisions given in this regard would be effective from the date this Standard
comes into effect.
33
First-time Adoption of Indian Accounting Standards
date of transition to Ind-ASs in accordance with Ind AS 106
Exploration for and Evaluation of Mineral Resources or Ind AS
36 respectively and, if necessary, reduce the amount determined
in accordance with (a) or (b) above. For the purposes of this
paragraph, oil and gas assets comprise only those assets used
in the exploration, evaluation, development or production of oil
and gas.
D8B Some entities hold items of property, plant and equipment or
intangible assets that are used, or were previously used, in operations
subject to rate regulation. The carrying amount of such items might
include amounts that were determined under previous GAAP but do not
qualify for capitalisation in accordance with Ind-ASs. If this is the case,
a first-time adopter may elect to use the previous GAAP carrying amount
of such an item at the date of transition to Ind-ASs as deemed cost. If
an entity applies this exemption to an item, it need not apply it to all
items. At the date of transition to Ind-ASs, an entity shall test for
impairment in accordance with Ind AS 36 each item for which this
exemption is used. For the purposes of this paragraph, operations are
subject to rate regulation if they provide goods or services to customers
at prices (i.e. rates) established by an authorised body empowered to
establish rates that bind the customers and that are designed to recover
the specific costs the entity incurs in providing the regulated goods or
services and to earn a specified return. The specified return could be a
minimum or range and need not be a fixed or guaranteed return.
Leases3
D9 A first-time adopter may apply paragraphs 6-9 of the Appendix C
of Ind AS 17 Determining whether an Arrangement contains a Lease to
determine whether an arrangement existing at the date of transition to
Ind-ASs contains a lease on the basis of facts and circumstances existing
at the date of transition to Ind-AS except where the effect is expected
to be not material.
3 Notification of Appendix C of Ind AS 17, Determining whether an Arrangement
contains a Lease, has been deferred. Accordingly, provisions given in this
regard would be effective from the date this Appendix comes into effect.
Indian Accounting Standards
34
D9A If a first-time adopter made the same determination of whether
an arrangement contained a lease in accordance with previous GAAP
as that required by Appendix C of Ind AS 17 – but at a date other than
that required by D9 above, the first-time adopter need not reassess
that determination when it adopts Ind-ASs. For an entity to have made
the same determination of whether the arrangement contained a lease
in accordance with previous GAAP, that determination would have to
have given the same outcome as that resulting from applying Ind AS 17
Leases and Appendix C of Ind AS 17.
Employee benefits
D10 [Refer to Appendix 1]
D11 An entity may disclose the amounts required by paragraph 120A(p)
of Ind AS 19 as the amounts are determined for each accounting period
prospectively from the date of transition to Ind-ASs.
D11A Ind AS 19 requires recognition of actuarial gains and losses for
post-employment defined benefit plans and other long-term employment
benefit plans in other comprehensive income immediately and are not
reclassified to profit or loss in a subsequent period. However, a firsttime
adopter may elect to recognise all cumulative actuarial gains and
losses subsequent to the date of transition to Ind-AS in other
comprehensive income.
Cumulative translation differences and accumulated
exchange differences
D12 Ind AS 21 requires an entity:
(a) to recognise some translation differences in other
comprehensive income and accumulate these in a separate
component of equity; and
(b) on disposal of a foreign operation, to reclassify the cumulative
translation difference for that foreign operation (including, if
35
First-time Adoption of Indian Accounting Standards
applicable, gains and losses on related hedges) from equity to
profit or loss as part of the gain or loss on disposal.
D13 However, a first-time adopter need not comply with these
requirements for cumulative translation differences that existed at the
date of transition to Ind-ASs. If a first-time adopter uses this exemption:
(a) the cumulative translation differences for all foreign
operations are deemed to be zero at the date of transition
to Ind-ASs; and
(b) the gain or loss on a subsequent disposal of any foreign
operation shall exclude translation differences that arose
before the date of transition to Ind-ASs and shall include
later translation differences.
D13A On the date of transition, if there are long-term monetary assets
or long-term monetary liabilities mentioned in paragraph 29A of Ind AS
21, an entity may exercise the option mentioned in that paragraph either
retrospectively or prospectively. If this option is exercised prospectively,
the accumulated exchange differences in respect of those items are
deemed to be zero on the date of transition.
Investments in subsidiaries, jointly controlled entities
and associates
D14 When an entity prepares separate financial statements, Ind AS
27 requires it to account for its investments in subsidiaries, jointly
controlled entities and associates either:
(a) at cost; or
(b) in accordance with Ind AS 39.
D15 If a first-time adopter measures such an investment at cost in
accordance with Ind AS 27, it shall measure that investment at one of
the following amounts in its separate opening Ind-AS Balance Sheet:
(a) cost determined in accordance with Ind AS 27; or
Indian Accounting Standards
36
(b) deemed cost. The deemed cost of such an investment shall
be its:
(i) fair value (determined in accordance with Ind AS 39 )
at the entity’s date of transition to Ind-ASs in its
separate financial statements; or
(ii) previous GAAP carrying amount at that date.
A first-time adopter may choose either (i) or (ii) above to measure
its investment in each subsidiary, jointly controlled entity or
associate that it elects to measure using a deemed cost.
Assets and liabilities of subsidiaries, associates and
joint ventures
D16 If a subsidiary becomes a first-time adopter later than its parent,
the subsidiary shall, in its financial statements, measure its assets and
liabilities at either:
(a) the carrying amounts that would be included in the parent’s
consolidated financial statements, based on the parent’s
date of transition to Ind-ASs, if no adjustments were made
for consolidation procedures and for the effects of the
business combination in which the parent acquired the
subsidiary; or
(b) the carrying amounts required by the rest of this Ind-AS, based
on the subsidiary’s date of transition to Ind-ASs. These carrying
amounts could differ from those described in (a):
(i) when the exemptions in this Ind-AS result in
measurements that depend on the date of transition to
Ind-ASs.
(ii) when the accounting policies used in the subsidiary’s
financial statements differ from those in the
consolidated financial statements. For example, the
37
First-time Adoption of Indian Accounting Standards
subsidiary may use as its accounting policy the cost
model in Ind AS 16 Property, Plant and Equipment,
whereas the group may use the revaluation model.
A similar election is available to an associate or joint venture
that becomes a first-time adopter later than an entity that
has significant influence or joint control over it.
D17 However, if an entity becomes a first-time adopter later than its
subsidiary (or associate or joint venture) the entity shall, in its consolidated
financial statements, measure the assets and liabilities of the subsidiary (or
associate or joint venture) at the same carrying amounts as in the financial
statements of the subsidiary (or associate or joint venture), after adjusting
for consolidation and equity accounting adjustments and for the effects of
the business combination in which the entity acquired the subsidiary.
Compound financial instruments
D18 Ind AS 32 Financial Instruments: Presentation requires an entity to
split a compound financial instrument at inception into separate liability and
equity components. If the liability component is no longer outstanding,
retrospective application of Ind AS 32 involves separating two portions of
equity. The first portion is in retained earnings and represents the cumulative
interest accreted on the liability component. The other portion represents
the original equity component. However, in accordance with this Ind-AS, a
first-time adopter need not separate these two portions if the liability
component is no longer outstanding at the date of transition to Ind-ASs.
Designation of previously recognised financial
instruments
D19 An entity is permitted to designate financial asset and liability in
accordance with Ind AS 39 as on the date of transition to Ind-AS’s.
Accordingly
(a) an entity is permitted to make an available-for-sale designation
at the date of transition to Ind-ASs.
Indian Accounting Standards
38
(b) an entity is permitted to designate, at the date of transition
to Ind-ASs, any financial asset or financial liability as at fair
value through profit or loss provided the asset or liability
meets the criteria as per Ind AS 39 at that date.
D19A Financial instruments carried at amortised cost should be
measured in accordance with Ind-AS 39 from the date of recognition of
financial instruments unless it is impracticable (as defined in Ind AS 8)
for an entity to apply retrospectively the effective interest method or the
impairment requirements in paragraphs 58–65 and AG84–AG93 of Ind
AS 39.If it is impracticable then the fair value of the financial instrument
at the date of transition to Ind-ASs shall be the new amortised cost of
that financial instrument at the date of transition to Ind-ASs.
D19B Financial instruments measured at fair value shall be measured
at fair value as on the date of transition to Ind-AS.
Fair value measurement of financial assets or financial
liabilities at initial recognition
D20 Notwithstanding the requirements of paragraphs 7 and 9, an entity
may apply the requirements in the last sentence of Ind AS 39 paragraph
AG76 and in paragraph AG76A, prospectively to transactions entered into
after financial years beginning on or after date of transition to Ind-ASs
Decommissioning liabilities included in the cost of
property, plant and equipment
D21 Appendix ‘A’ to Ind AS 16 Changes in Existing Decommissioning,
Restoration and Similar Liabilities requires specified changes in a
decommissioning, restoration or similar liability to be added to or
deducted from the cost of the asset to which it relates; the adjusted
depreciable amount of the asset is then depreciated prospectively over
its remaining useful life. A first-time adopter need not comply with these
requirements for changes in such liabilities that occurred before the
date of transition to Ind-ASs. If a first-time adopter uses this exemption,
39
First-time Adoption of Indian Accounting Standards
it shall:
(a) measure the liability as at the date of transition to Ind-ASs
in accordance with Ind AS 37;
(b) to the extent that the liability is within the scope of Appendix
A of Ind AS 16, estimate the amount that would have been
included in the cost of the related asset when the liability
first arose, by discounting the liability to that date using its
best estimate of the historical risk-adjusted discount rate(s)
that would have applied for that liability over the intervening
period; and
(c) calculate the accumulated depreciation on that amount, as
at the date of transition to Ind-ASs, on the basis of the
current estimate of the useful life of the asset, using the
depreciation policy adopted by the entity in accordance with
Ind-ASs.
D21A An entity that uses the exemption in paragraph D8A(b) (for oil
and gas assets in the development or production phases accounted for
in cost centres that include all properties in a large geographical area
under previous GAAP) shall, instead of applying paragraph D21 or
Appendix A of Ind AS 16:
(a) measure decommissioning, restoration and similar liabilities
as at the date of transition to Ind-ASs in accordance with
Ind AS 37; and
(b) recognise directly in retained earnings any difference
between that amount and the carrying amount of those
liabilities at the date of transition to Ind-ASs determined
under the entity’s previous GAAP.
Indian Accounting Standards
40
Financial assets or intangible assets accounted for in
accordance with Appendix A to Ind AS 114
D22 A first-time adopter may apply the following provisions while applying
the Appendix A to Ind AS 11:
(i) Subject to paragraph (ii), changes in accounting policies are
accounted for in accordance with Ind AS 8, i.e. retrospectively.
(ii) If, for any particular service arrangement, it is impracticable for
an operator to apply this Appendix retrospectively at the date
of transition, it shall:
(a) recognise financial assets and intangible assets that
existed at the date of transition;
(b) use the previous carrying amounts of those financial and
intangible assets (however previously classified) as their
carrying amounts as at that date; and
(c) test financial and intangible assets recognised at that date
for impairment, unless this is not practicable, in which
case the amounts shall be tested for impairment as at the
start of the current period.
(iii) There are two aspects to retrospective determination:
reclassification and remeasurement. It will usually be practicable
to determine retrospectively the appropriate classification of all
amounts previously included in an operator’s balance sheet,
but that retrospective remeasurement of service arrangement
assets might not always be practicable. However, the fact should
be disclosed.
Borrowing costs
D23 [Refer to Appendix 1]
4 Notification of Appendix A of Ind AS 11, Service Concession Arrangements,
has been deferred. Accordingly, provisions given in this regard would be effective
from the date this Appendix comes into effect.
41
First-time Adoption of Indian Accounting Standards
Transfers of assets from customers
D24 A first time adopter shall apply Appendix D of Ind AS 18
prospectively to transfers of assets from customers received on or after
the date of transition to Ind-AS, Earlier application is permitted provided
the valuations and other information needed to apply Appendix D of Ind
AS 18 to past transfers were obtained at the time those transfers
occurred. An entity shall disclose the date from which the Appendix D
of Ind AS 18 was applied.
Extinguishing financial liabilities with equity instruments
D25 A first-time adopter may apply Appendix E of Ind AS 39
Extinguishing Financial Liabilities with Equity Instruments from the date
of transition to Ind-AS.
Non-current assets held for sale and discontinued
operations
D26 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 as 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.
Indian Accounting Standards
42
Appendix E
Short-term exemptions from Ind-ASs
[Appendix reserved for future possible short-term exemptions]
This appendix is an integral part of the Ind-AS.
43
First-time Adoption of Indian Accounting Standards
Appendix F
Guidance on implementing
Ind-as 101 First-time Adoption of Indian Accounting
Standards
Contents
INTRODUCTION IG1
Ind AS 10 Events after the Reporting Period IG2–IG4
Ind AS 12 Income Taxes IG5–IG6
Ind AS16 Property, Plant and Equipment IG7–IG13
Ind AS 17 Leases G14–IG16
Ind AS 18 Revenue IG17
Ind AS 19 Employee Benefits IG18–IG21
Ind AS 21 The Effects of Changes in Foreign
Exchange Rates IG21A
Ind AS 103 Business Combinations IG22
Ind AS 23 Borrowing Costs IG23–IG25
Ind AS 27 Consolidated and Separate Financial
Statements IG26–IG31
Ind AS 29 Financial Reporting in Hyperinflationary
Economies IG32–IG34
Ind AS 32 Financial Instruments: Presentation IG35–IG36
Ind AS 34 Interim Financial Reporting IG37–IG38
Ind AS 36 Impairment of Assets and
Ind AS 37 Provisions, Contingent Liabilities and
Contingent Assets IG39–IG43
Indian Accounting Standards
44
Ind AS 38 Intangible Assets IG44–IG51
Ind AS 39 Financial Instruments: Recognition and
Measurement IG52– IG60B
Recognition IG53–IG54
Embedded derivatives IG55
Measurement IG56–IG58
Transition adjustments IG58A–IG59
Hedge accounting IG60–IG60B
Ind AS 40 Investment Property IG61–IG62
Ind AS 105 Non-current Assets Held for Sale and
Discontinued Operations IG62A–IG62A
Explanation of transition to Ind-ASs IG63
Ind AS 102 Share-based Payment IG64–IG65
Appendices to Indian Accounting Standards
Appendix A to Ind AS 16 Changes in Existing
Decommissioning, Restoration and Similar Liabilities IG201–IG203
Appendix C to Ind AS 17 Determining whether an
Arrangement contains a Lease IG204–IG206
45
First-time Adoption of Indian Accounting Standards
List of Examples
1 Estimates IG3
2 Business combination IG22
3 Business combination–restructuring provision IG22
4 Business combination–intangible assets IG22
5 Business combination–goodwill deducted from equity
and treatment of related intangible assets IG22
6 Business combination–subsidiary not consolidated in
accordance with previous GAAP IG22
7 Business combination–finance lease not capitalised
in accordance with previous GAAP IG22
8 Parent adopts Ind-ASs before subsidiary IG29
9 Subsidiary adopts Ind-ASs before parent IG29
10 Interim financial reporting IG38
11A Reconciliation of equity and total comprehensive
income IG63
11B Format for reconciliation in accordance with IG 63
paragraph 24(a) and (d) for an entity that elects
to apply paragraph 21(b)
11C Format for reconciliation in accordance with IG 63
paragraph 24(a) and (b)for an entity that elects
to apply paragraph 21(a)
201 Changes in existing decommissioning, restoration
and similar liabilities IG203
202 Determining whether an arrangement contains a lease IG205
Indian Accounting Standards
46
Guidance on implementing Ind-AS 101 First-time
Adoption of Indian Accounting Standards
This guidance accompanies, but is not part of, Ind-AS 101.
Introduction
IG1 This implementation guidance:
(a) explains how the requirements of this Ind-AS interact with
the requirements of some other Ind-ASs (paragraphs IG2–
IG62, IG64 and IG65). This explanation addresses those
Ind-ASs that are most likely to involve questions that are
specific to first-time adopters.
(b) includes an illustrative example to show how a first-time
adopter might disclose how the transition to Ind-ASs affected
its reported financial position, financial performance and
cash flows, as required by paragraphs 24(a) (b) and (d), 25
and 26 of this Ind-AS (paragraph IG63).
Ind AS 10 Events after the Reporting Period
IG2 Except as described in paragraph IG3, an entity applies Ind AS
10 in determining whether:
(a) its opening Ind-AS Balance Sheet reflects an event that
occurred after the date of transition to Ind-ASs; and .
(b) where an entity decides to provide one year comparative
information under Ind-AS then, comparative amounts in its
first Ind-AS financial statements reflect an event that
occurred after the end of that comparative period.
IG3 Paragraphs 14 –17 of this Ind-AS require some modifications to
the principles in Ind AS 10 when a first-time adopter determines whether
changes in estimates are adjusting or non-adjusting events at the date
47
First-time Adoption of Indian Accounting Standards
of transition to Ind-ASs (or, when applicable, the end of the comparative
period). Cases 1 and 2 below illustrate those modifications. In case 3
below, paragraphs 14–17 of this Ind-AS do not require modifications to
the principles in Ind AS 10.
(a) Case 1—Previous GAAP required estimates of similar items
for the date of transition to Ind-ASs, using an accounting
policy that is consistent with Ind-ASs. In this case, the
estimates in accordance with Ind-ASs need to be consistent
with estimates made for that date in accordance with
previous GAAP, unless there is objective evidence that those
estimates were in error (see Ind AS 10 Accounting Policies,
Changes in Accounting Estimates and Errors). The entity
reports later revisions to those estimates as events of the
period in which it makes the revisions, rather than as
adjusting events resulting from the receipt of further
evidence about conditions that existed at the date of
transition to Ind-ASs.
(b) Case 2—Previous GAAP required estimates of similar items
for the date of transition to Ind-ASs, but the entity made
those estimates using accounting policies that are not
consistent with its accounting policies in accordance with
Ind-ASs. In this case, the estimates in accordance with Ind-
ASs need to be consistent with the estimates required in
accordance with previous GAAP for that date (unless there
is objective evidence that those estimates were in error),
after adjusting for the difference in accounting policies. The
opening Ind-AS Balance Sheet reflects those adjustments
for the difference in accounting policies. As in case 1, the
entity reports later revisions to those estimates as events
of the period in which it makes the revisions.
For example, previous GAAP may have required an entity to
recognise and measure provisions on a basis consistent with
Ind AS 37 Provisions, Contingent Liabilities and Contingent
Assets, except that the previous GAAP measurement was on
an undiscounted basis. In this example, the entity uses the
Indian Accounting Standards
48
estimates in accordance with previous GAAP as inputs in making
the discounted measurement required by Ind AS 37.
(c) Case 3—Previous GAAP did not require estimates of similar
items for the date of transition to Ind-ASs. Estimates in
accordance with Ind-ASs for that date reflect conditions
existing at that date. In particular, estimates of market prices,
interest rates or foreign exchange rates at the date of
transition to Ind-ASs reflect market conditions at that date.
This is consistent with the distinction in Ind AS 10 between
adjusting events after the reporting period and non-adjusting
events after the reporting period.
IG Example 1 Estimates
(illustration assuming the company has elected not to provide prior
period comparatives in accordance with Ind-AS)
Background
Entity A’s first Ind-AS financial statements are for a period that ends
on 31 March 2012. In its previous GAAP financial statements for 31
March 2011, entity A:
(a) made estimates of accrued expenses and provisions at
those dates;
(b) accounted on a cash basis for a defined benefit pension
plan; and
(c) did not recognise a provision for a court case arising from
events that occurred in December 2010. When the court
case was concluded on 30 June 2011, entity A was
required to pay Rs,1,000 and paid this on 10 July 2011.
In preparing its first Ind-AS financial statements, entity A concludes
that its estimates in accordance with previous GAAP of accrued
expenses and provisions at 31 March 2011 were made on a basis
49
First-time Adoption of Indian Accounting Standards
consistent with its accounting policies in accordance with Ind-ASs.
Although some of the accruals and provisions turned out to be
overestimates and others to be underestimates, entity A concludes
that its estimates were reasonable and that, therefore, no error had
occurred. As a result, accounting for those overestimates and
underestimates involves the routine adjustment of estimates in
accordance with Ind AS 8.
Application of requirements
In preparing its opening Ind-AS Balance Sheet at April 1, 2011,
entity A:
(a) does not adjust the previous estimates for accrued
expenses and provisions; and
(b) makes estimates (in the form of actuarial assumptions)
necessary to account for the pension plan in accordance
with Ind AS 19 Employee Benefits. Entity A’s actuarial
assumptions at April 1, 2011 do not reflect conditions that
arose after those dates. For example, entity A’s:
(i) discount rates at March 31, 2011 for the pension
plan and for provisions reflect market conditions at
those dates; and
(ii) actuarial assumptions at March 31, 2011 about future
employee turnover rates do not reflect conditions that
arose after those dates—such as a significant
increase in estimated employee turnover rates as
a result of a curtailment of the pension plan in
2011-12.
(c) The treatment of the court case at 31 March 2011 depends
on the reason why entity A did not recognise a provision
in accordance with previous GAAP at that date.
Indian Accounting Standards
50
Assumption 1 – Previous GAAP was consistent with Ind AS 37
Provisions, Contingent Liabilities and Contingent Assets. Entity A
concluded that the recognition criteria were not met. In this case,
entity A’s assumptions in accordance with Ind-ASs are consistent
with its assumptions in accordance with previous GAAP. Therefore,
entity A does not recognise a provision at 31 March 2011.
Assumption 2 – Previous GAAP was not consistent with Ind AS 37.
Therefore, entity A develops estimates in accordance with Ind AS
37. Under Ind AS 37, an entity determines whether an obligation
exists at the end of the reporting period by taking account of all
available evidence, including any additional evidence provided by
events after the reporting period. Similarly, in accordance with Ind
AS 10 Events after the Reporting Period, the resolution of a court
case after the reporting period is an adjusting event after the reporting
period if it confirms that the entity had a present obligation at that
date. In this instance, the resolution of the court case confirms that
entity A had a liability in December 31, 2010 (when the events
occurred that gave rise to the court case). Therefore, entity A
recognises a provision at 31 March 2011. Entity A measures that
provision by discounting the Rs 1,000 paid on 10 September 2011 to
its present value, using a discount rate that complies with Ind AS 37
and reflects market conditions at 31 March 2011.
IG4 Paragraphs 14–17 of this Ind-AS do not override requirements in
other Ind-ASs that base classifications or measurements on
circumstances existing at a particular date.
Examples include:
(a) the distinction between finance leases and operating leases
(see Ind AS 17 Leases);
(b) the restrictions in Ind AS 38 Intangible Assets that prohibit
capitalisation of expenditure on an internally generated
intangible asset if the asset did not qualify for recognition
when the expenditure was incurred; and
51
First-time Adoption of Indian Accounting Standards
(c) the distinction between financial liabilities and equity instruments
(see Ind AS 32 Financial Instruments: Presentation).
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
Balance Sheet and their tax bases.
IG6 In accordance with Ind AS 12, the measurement of current and
deferred tax reflects tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting period. An entity
accounts for the effect of changes in tax rates and tax laws when those
changes are enacted or substantively enacted.
Ind AS 16 Property, Plant and Equipment
IG7 If an entity’s depreciation methods and rates in accordance with
previous GAAP are acceptable in accordance with Ind-ASs, it accounts
for any change in estimated useful life or depreciation pattern
prospectively from when it makes that change in estimate (paragraphs
14 and 15 of the Ind-AS and paragraph 61 of Ind AS 16). However, in
some cases, an entity’s depreciation methods and rates in accordance
with previous GAAP may differ from those that would be acceptable in
accordance with Ind-ASs (for example, if they were adopted solely for
tax purposes and do not reflect a reasonable estimate of the asset’s
useful life). If those differences have a material effect on the financial
statements, the entity adjusts accumulated depreciation in its opening
Ind-AS Balance Sheet retrospectively so that it complies with Ind-ASs.
IG7A In accordance with paragraph D7A a first-time adopter may elect
to continue with the carrying value of all of its property, plant and
equipment as at the date of transition measured as per the previous
GAAP and use that as its deemed cost at the date of transition. However,
if a first time adopter opts for exemption in paragraph D7A then it has
following consequences for property, plant and equipment:
Indian Accounting Standards
52
(a) recognising all assets whose recognition is required by Ind-
AS and not recognizing items of assets if Ind-AS do not
permit such recognition. For example Appendix A of Ind AS
17: Leases and Appendix A of Ind AS 11: Construction
Contracts.
(b) reclassify items that it recognised in accordance with
previous GAAP as one type of asset but are a different type
of asset in accordance with Ind-AS. For example Ind AS
105: Non-current Assets Held for Sale and Discontinued
Operations and Ind AS 40: Investment Property.
(c) derecognise the carrying value of decommissioning, restoration
or similar liability recognised as cost of asset and a
corresponding provision in accordance with previous GAAP if
any and recognise decommissioning, restoration or similar
liability in accordance with paragraph D21 of this standard.
(d) Identify each part of an item of property, plant and equipment
with a cost that is significant in relation to the total cost of
the item of property, plant and equipment as at the date of
transition and subsequent depreciation of each significant
part in accordance with Ind AS 16: Property, Plant and
Equipment.
IG8 An entity may elect to use one of the following amounts as the
deemed cost of an item of property, plant and equipment:
(a) fair value at the date of transition to Ind-ASs (paragraph D5
of this Ind-AS), in which case the entity gives the disclosures
required by paragraph 30 of this Ind-AS;
(b) a revaluation in accordance with previous GAAP that meets
the criteria in paragraph D6 of this Ind-AS;
(c) fair value at the date of an event such as a privatisation or
initial public offering (paragraph D8 of this Ind-AS); or
53
First-time Adoption of Indian Accounting Standards
(d) an allocation of an amount determined under previous GAAP
that meets the criteria in paragraph D8A of this Ind-AS.
(e) the carrying amount under previous GAAP of an item of
property, plant and equipment that is used, or was previously
used, in operations (paragraph D7A and D8B of the Ind-
AS).
IG9 Subsequent depreciation is based on that deemed cost and starts
from the date for which the entity established the deemed cost.
IG10 If an entity chooses as its accounting policy the revaluation model
in Ind AS 16 for some or all classes of property, plant and equipment, it
presents the cumulative revaluation surplus as a separate component
of equity. The revaluation surplus at the date of transition to Ind-ASs is
based on a comparison of the carrying amount of the asset at that date
with its cost or deemed cost. If the deemed cost is the fair value at the
date of transition to Ind-ASs, the entity gives the disclosures required
by paragraph 30 of this Ind-AS.
IG11 If revaluations in accordance with previous GAAP did not satisfy
the criteria in paragraph D6 or D8 of this Ind-AS, an entity measures
the revalued assets in its opening Balance Sheet on one of the following
bases:
(a) cost (or deemed cost) less any accumulated depreciation
and any accumulated impairment losses under the cost
model in Ind AS 16;
(b) deemed cost, being the fair value at the date of transition
to Ind-ASs (paragraph D5 of this Ind-AS); or
(c) revalued amount, if the entity adopts the revaluation model
in Ind AS 16 as its accounting policy in accordance with
Ind-ASs for all items of property, plant and equipment in
the same class.
IG12 Ind AS 16 requires each part of an item of property, plant and
equipment with a cost that is significant in relation to the total cost of
Indian Accounting Standards
54
the item to be depreciated separately. However, Ind AS 16 does not
prescribe the unit of measure for recognition of an asset, i.e. what
constitutes an item of property, plant and equipment. Thus, judgement
is required in applying the recognition criteria to an entity’s specific
circumstances (see Ind AS 16 paragraphs 9 and 43).
IG13 In some cases, the construction or commissioning of an asset
results in an obligation for an entity to dismantle or remove the asset
and restore the site on which the asset stands. An entity applies Ind AS
37 Provisions, Contingent Liabilities and Contingent Assets in
recognising and measuring any resulting provision. The entity applies
Ind AS 16 in determining the resulting amount included in the cost of
the asset, before depreciation and impairment losses. Items such as
depreciation and, when applicable, impairment losses cause differences
between the carrying amount of the liability and the amount included in
the carrying amount of the asset. An entity accounts for changes in
such liabilities in accordance with Appendix A to Ind AS 16 -Changes in
Existing Decommissioning, Restoration and Similar Liabilities.
However, paragraph D21 of Ind-AS 101 provides an exemption for
changes that occurred before the date of transition to Ind-ASs, and
prescribes an alternative treatment where the exemption is used. An
example of the first-time adoption of Appendix A to Ind AS 16, which
illustrates the use of this exemption, is given at paragraphs IG201–
IG203.
Ind AS 17 Leases
IG14 At the date of transition to Ind-ASs, a lessee or lessor classifies
leases as operating leases or finance leases on the basis of
circumstances existing at the inception of the lease (Ind AS 17 paragraph
13). In some cases, the lessee and the lessor may agree to change the
provisions of the lease, other than by renewing the lease, in a manner
that would have resulted in a different classification in accordance with
Ind AS 17 had the changed terms been in effect at the inception of the
lease. If so, the revised agreement is considered as a new agreement
over its term. However, changes in estimates (for example, changes in
estimates of the economic life or of the residual value of the leased
55
First-time Adoption of Indian Accounting Standards
property) or changes in circumstances (for example, default by the
lessee) do not give rise to a new classification of a lease.
IG 15 [Refer to Appendix 1]
IG16 [Refer to Appendix 1]
Ind AS 18 Revenue
IG17 If an entity has received amounts that do not yet qualify for
recognition as revenue in accordance with Ind AS 18 (for example, the
proceeds of a sale that does not qualify for revenue recognition), the
entity recognises the amounts received as a liability in its opening Ind-
AS Balance Sheet and measures that liability at the amount received.
Ind AS 19 Employee Benefits
IG18 [Refer to Appendix 1]
IG19 An entity’s actuarial assumptions at the date of transition to Ind-
ASs are consistent with actuarial assumptions 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 assumptions were in error (paragraph 14 of this Ind-AS). The
impact of any later revisions to those assumptions is an actuarial gain
or loss of the period in which the entity makes the revisions.
IG20 An entity may need to make actuarial assumptions at the date of
transition to Ind-ASs that were not necessary in accordance with its
previous GAAP. Such actuarial assumptions do not reflect conditions
that arose after the date of transition to Ind-ASs. In particular, discount
rates and the fair value of plan assets at the date of transition to Ind-
ASs reflect market conditions at that date. Similarly, the entity’s actuarial
assumptions at the date of transition to Ind-ASs about future employee
turnover rates do not reflect a significant increase in estimated employee
turnover rates as a result of a curtailment of the pension plan that
occurred after the date of transition to Ind-ASs (paragraph 16 of this
Ind-AS).
Indian Accounting Standards
56
IG21 An entity’s first Ind-AS financial statements will reflect
measurements of employee benefit obligations at the following dates:
the end of the first Ind-AS reporting period, the date of the comparative
where an entity has decided to provide comparative financial information
in accordance with Ind-AS balance sheet and the date of transition to
Ind-ASs. Ind AS 19 encourages an entity to involve a qualified actuary
in the measurement of all material post-employment benefit obligations.
To minimise costs, an entity may request a qualified actuary to carry
out a detailed actuarial valuation at one or two of these dates and roll
the valuation(s) forward or back to the other date(s). Any such roll
forward or roll back reflects any material transactions and other material
events (including changes in market prices and interest rates) between
those dates (Ind AS 19).
Ind AS 21 The Effects of Changes in Foreign
Exchange Rates
IG21A An entity may, in accordance with previous GAAP, have treated
goodwill arising on the acquisition of a foreign operation and any fair
value adjustments to the carrying amounts of assets and liabilities arising
on the acquisition of that foreign operation as assets and liabilities of
the entity rather than as assets and liabilities of the foreign operation.
If so, the entity is permitted to apply prospectively the requirements of
paragraph 47 of Ind AS 21 to all acquisitions occurring after the date of
transition to Ind-ASs.
Ind AS 103 Business Combinations
IG22 The following examples illustrate the effect of Appendix C to the
Ind-AS, assuming that a first-time adopter uses the exemption.
IG Example 2 Business combination
Background
Entity B’s first Ind-AS financial statements are for a period that ends
on 31 March 2012 and has elected not to provide comparative
57
First-time Adoption of Indian Accounting Standards
information for the year ending 31 March, 2011 under this Ind-AS.
On 1 July 2010, entity B acquired 100 per cent of subsidiary C. In
accordance with its previous GAAP, entity B:
(a) classified the business combination as an acquisition by
entity B.
(b) measured the assets acquired and liabilities assumed at
the following amounts in accordance with previous GAAP
at 1 April 2011 (date of transition to Ind-ASs):
(i) identifiable assets less liabilities for which Ind-ASs
require cost-based measurement at a date after the
business combination: Rs 200 (with a tax base of
Rs150 and an applicable tax rate of 30 per cent).
(ii) pension liability (for which the present value of the
defined benefit obligation measured in accordance
with AS 15 (Revised 20XX) Employee Benefits is
Rs 130 and the fair value of plan assets is Rs100):
nil (because entity B used a pay-as-you-go cash
method of accounting for pensions in accordance with
its previous GAAP). The tax base of the pension
liability is also nil.
(iii) goodwill: Rs180.
(c) did not, at the acquisition date, recognise deferred tax
arising from temporary differences associated with the
identifiable assets acquired and liabilities assumed.
Application of requirements
In its opening (consolidated) Ind-AS Balance Sheet, entity B:
(a) classifies the business combination as an acquisition
by entity B even if the business combination would
have qualified in accordance with Ind AS 103 as a
reverse acquisition by subsidiary C (paragraph C4(a) of this
Ind-AS).
Indian Accounting Standards
58
(b) does not adjust the accumulated amortisation of goodwill.
Entity B tests the goodwill for impairment in accordance
with Ind AS 36 Impairment of Assets and recognises any
resulting impairment loss, based on conditions that existed
at the date of transition to Ind-ASs. If no impairment exists,
the carrying amount of the goodwill remains at Rs 180
(paragraph C4(g) of this Ind-AS).
(c) for those net identifiable assets acquired for which Ind-
ASs require cost-based measurement at a date after the
business combination, treats their carrying amount in
accordance with previous GAAP immediately after the
business combination as their deemed cost at that date
(paragraph C4(e) of this Ind-AS).
(d) does not restate the accumulated depreciation and
amortisation of the net identifiable assets in (c), unless
the depreciation methods and rates in accordance with
previous GAAP result in amounts that differ materially from
those required in accordance with Ind-ASs (for example,
if they were adopted solely for tax purposes and do not
reflect a reasonable estimate of the asset’s useful life in
accordance with Ind-ASs). If no such restatement is made,
the carrying amount of those assets in the opening Ind-
AS Balance Sheet equals their carrying amount in
accordance with previous GAAP at the date of transition
to Ind-ASs (Rs 200) (paragraph IG7).
(e) if there is any indication that identifiable assets are
impaired, tests those assets for impairment, based on
conditions that existed at the date of transition to Ind-ASs
(see Ind AS 36).
(f) recognises the pension liability, and measures it, at the
present value of the defined benefit obligation (Rs 130)
less the fair value of the plan assets (Rs 100), giving a
carrying amount of Rs 30, with a corresponding debit
of Rs 30 to retained earnings (paragraph C4(d) of this
59
First-time Adoption of Indian Accounting Standards
Ind-AS). However, if subsidiary C had already adopted
Ind-ASs in an earlier period, entity B would measure the
pension liability at the same amount as in subsidiary C’s
financial statements (paragraph D17 of this Ind-AS and IG
Example 9).
(g) recognises a net deferred tax liability of Rs 6 (Rs 20 at 30
per cent) arising from:
(i) the taxable temporary difference of Rs 50 (Rs 200
less Rs 150) associated with the identifiable assets
acquired and non-pension liabilities assumed, less
(ii) the deductible temporary difference of Rs 30 (Rs 30
less nil) associated with the pension liability.
The entity recognises the resulting increase in the deferred
tax liability as a deduction from retained earnings
(paragraph C4(k) of this Ind-AS). If a taxable temporary
difference arises from the initial recognition of the goodwill,
entity B does not recognise the resulting deferred tax
liability (paragraph 15(a) of Ind AS 12 Income Taxes).
IG Example 3 Business combination—restructuring provision
Background
Entity D’s first Ind-AS financial statements are for a period that ends
on 31 March 2012 and has elected not to provide comparative
information for the year ending 31 March, 2011 under Ind-AS. On 1
January 2011, entity D acquired 100 per cent of subsidiary E. In
accordance with its previous GAAP, entity D recognised an
(undiscounted) restructuring provision of Rs 100 that would not have
qualified as an identifiable liability in accordance with Ind AS 103.
The recognition of this restructuring provision increased goodwill by
Rs 100. At 31 March 2011 (date of transition to Ind-ASs ), entity D:
(a) had paid restructuring costs of Rs 60; and
Indian Accounting Standards
60
(b) estimated that it would pay further costs of Rs 40 in 2011-
12 and that the effects of discounting were immaterial. At
31 March 2011, those further costs did not qualify for
recognition as a provision in accordance with Ind AS 37
Provisions, Contingent Liabilities and Contingent Assets.
Application of requirements
In its opening Ind-AS Balance Sheet, entity D:
(a) does not recognise a restructuring provision (paragraph C4(c)
of this Ind-AS).
(b) does not adjust the amount assigned to goodwill. However,
entity D tests the goodwill for impairment in accordance with
Ind AS 36 Impairment of Assets, and recognises any resulting
impairment loss (paragraph C4(g) of this Ind-AS).
(c) as a result of (a) and (b), reports retained earnings in its
opening Ind-AS Balance Sheet that are higher by Rs 40 (before
income taxes, and before recognising any impairment loss)
than in the Balance Sheet at the same date in accordance
with previous GAAP.
IG Example 4 Business combination—intangible assets
Background
Entity F’s first Ind-AS financial statements are for a period that ends on
31 March 2012 and has elected not to provide comparative information
for the year ending 31 March, 2011 under Ind-AS.
On 1 October 2009 entity F acquired 75 per cent of subsidiary G. In
accordance with its previous GAAP, entity F assigned an initial carrying
amount of Rs 200 to intangible assets that would not have qualified for
recognition in accordance with Ind AS 38 Intangible Assets. The tax
base of the intangible assets was nil, giving rise to a deferred tax liability
(at 30 per cent) of Rs 60.
61
First-time Adoption of Indian Accounting Standards
On 31 March 2011 (the date of transition to Ind-ASs) the carrying
amount of the intangible assets in accordance with previous GAAP
was Rs 160, and the carrying amount of the related deferred tax
liability was Rs 48 (30 per cent of Rs 160).
Application of requirements
Because the intangible assets do not qualify for recognition as
separate assets in accordance with Ind AS 38, entity F transfers
them to goodwill, together with the related deferred tax liability
(Rs 48) and non-controlling interests (paragraph C4(g)(i) of this Ind-
AS). The related non-controlling interests amount to Rs 28 (25 per
cent of [Rs 160 –Rs 48 = Rs 112]). Thus, the increase in goodwill is
Rs 84—intangible assets (Rs 160) less deferred tax liability (Rs 48)
less non-controlling interests (Rs 28).
Entity F tests the goodwill for impairment in accordance with Ind AS
36 Impairment of Assets and recognises any resulting impairment
loss, based on conditions that existed at the date of transition to
Ind-ASs (paragraph C4(g)(ii) of this Ind-AS).
IG Example 5 Business combination—goodwill deducted from
equity and treatment of related intangible assets
Background
Entity H acquired a subsidiary before the date of transition to Ind-
ASs. In accordance with its previous GAAP, entity H:
(a) recognised goodwill as an immediate deduction from
equity;
(b) recognised an intangible asset of the subsidiary that does
not qualify for recognition as an asset in accordance with
Ind AS 38 Intangible Assets; and
(c) did not recognise an intangible asset of the subsidiary
that would qualify in accordance with Ind AS 38 for
recognition as an asset in the financial statements of the
Indian Accounting Standards
62
subsidiary. The subsidiary held the asset at the date of its
acquisition by entity H.
Application of requirements
In its opening Ind-AS Balance Sheet, entity H:
(a) does not recognise the goodwill, as it did not recognise the
goodwill as an asset in accordance with previous GAAP
(paragraph C4(g)–(i) of this Ind-AS).
(b) does not recognise the intangible asset that does not qualify
for recognition as an asset in accordance with Ind AS 38.
Because entity H deducted goodwill from equity in accordance
with its previous GAAP, the elimination of this intangible asset
reduces retained earnings (paragraph C4(c)(ii) of this Ind-
AS).
(c) recognises the intangible asset that qualifies in accordance
with Ind AS 38 for recognition as an asset in the financial
statements of the subsidiary, even though the amount assigned
to it in accordance with previous GAAP in entity H’s
consolidated financial statements was nil (paragraph C4(f) of
this Ind-AS). The recognition criteria in Ind AS 38 include the
availability of a reliable measurement of cost (paragraphs
IG45–IG48) and entity H measures the asset at cost less
accumulated depreciation and less any impairment losses
identified in accordance with Ind AS 36 Impairment of Assets.
Because entity H deducted goodwill from equity in accordance
with its previous GAAP, the recognition of this intangible asset
increases retained earnings (paragraph C4(c)(ii) of this Ind-
AS). However, if this intangible asset had been subsumed in
goodwill recognised as an asset in accordance with previous
GAAP, entity H would have decreased the carrying amount of
that goodwill accordingly (and, if applicable, adjusted deferred
tax and non-controlling interests) (paragraph C4(g)(i) of this
Ind-AS).
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First-time Adoption of Indian Accounting Standards
IG Example 6 Business combination—subsidiary not consolidated
in accordance with previous GAAP
Background
Parent J’s date of transition to Ind-ASs is 1 April 2011. In accordance
with its previous GAAP, parent J did not consolidate its 75 per cent
subsidiary K, acquired in a business combination on 15 October
2009. On 1 April 2011:
(a) the cost of parent J’s investment in subsidiary K is Rs 180.
(b) in accordance with Ind-ASs, subsidiary K would measure
its assets at Rs 500 and its liabilities (including deferred
tax in accordance with Ind AS 12 Income Taxes) at Rs 300.
On this basis, subsidiary K’s net assets are Rs 200 in
accordance with Ind-ASs.
Application of requirements
Parent J consolidates subsidiary K. The consolidated Balance Sheet
at 1 April 2011 includes:
(a) subsidiary K’s assets at Rs 500 and liabilities at Rs 300;
(b) non-controlling interests of Rs 50 (25 per cent of [Rs 500
–Rs 300]); and
(c) goodwill of Rs 30 (cost of Rs180 less 75 per cent of [Rs
500 –Rs 300]) (paragraph C4(j) of this Ind-AS). Parent J
tests the goodwill for impairment in accordance with Ind
AS 36 Impairment of Assets and recognises any resulting
impairment loss, based on conditions that existed at the
date of transition to Ind-ASs (paragraph C4(g)(ii) of this
Ind-AS).
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64
IG Example 7 Business combination—finance lease not capitalised
in accordance with previous GAAP
Background
Parent L’s date of transition to Ind-ASs is 1 April 2011. Parent L
acquired subsidiary M on 15 April 2009 and did not capitalise
subsidiary M’s finance leases. If subsidiary M prepared financial
statements in accordance with Ind-ASs, it would recognise finance
lease obligations of 300 and leased assets of 250 at 1 April 2011.
Application of requirements
In its consolidated opening Ind-AS Balance Sheet, parent L
recognises finance lease obligations of Rs 300 and leased assets of
Rs 250, and charges Rs 50 to retained earnings (paragraph C4(f)).
Ind AS 23 Borrowing Costs
IG23 [Refer to Appendix 1]
IG24 [Refer to Appendix 1]
IG25 [Refer to Appendix 1]
Ind AS 27 Consolidated and Separate Financial
Statements
IG26 A first-time adopter consolidates all subsidiaries (as defined in
Ind AS 27), unless Ind AS 27 requires otherwise.
IG27 If a first-time adopter did not consolidate a subsidiary in
accordance with previous GAAP, then:
(a) in its consolidated financial statements, the first-time adopter
measures the subsidiary’s assets and liabilities at the same
carrying amounts as in this Ind-AS financial statements of
65
First-time Adoption of Indian Accounting Standards
the subsidiary, after adjusting for consolidation procedures
and for the effects of the business combination in which it
acquired the subsidiary (paragraph D17 of this Ind-AS). If
the subsidiary has not adopted Ind-ASs in its financial
statements, the carrying amounts described in the previous
sentence are those that Ind-ASs would require in those
financial statements (paragraph C4(j) of this Ind-AS).
(b) if the parent acquired the subsidiary in a business
combination before the date of transition to Ind-AS, the
parent recognises goodwill, as explained in IG Example 6.
(c) if the parent did not acquire the subsidiary in a business
combination because it created the subsidiary, the parent
does not recognise goodwill.
IG28 When a first-time adopter adjusts the carrying amounts of assets
and liabilities of its subsidiaries in preparing its opening Ind-AS Balance
Sheet, this may affect non-controlling interests and deferred tax.
IG29 IG Examples 8 and 9 illustrate paragraphs D16 and D17 of this
Ind-AS, which address cases where a parent and its subsidiary become
first-time adopters at different dates.
IG Example 8 Parent adopts Ind-ASs before subsidiary
Background
Parent N presents its (consolidated) first Ind-AS financial statements
for the year ended March 31, 2012. Its foreign subsidiary O, wholly
owned by parent N since formation, prepares information in accordance
with Ind-ASs for internal consolidation purposes from that date, but
subsidiary O does not present its first Ind-AS financial statements until
March 31, 2014.
Application of requirements
If subsidiary O applies paragraph D16(a) of this Ind-AS, the carrying
amounts of its assets and liabilities are the same in both its opening
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66
Ind-AS Balance Sheet at 1 April 2014 and parent N’s consolidated
Balance Sheet (except for adjustments for consolidation procedures)
and are based on parent N’s date of transition to Ind-ASs.
Alternatively, subsidiary O may, in accordance with paragraph D16(b)
of this Ind-AS, measure all its assets or liabilities based on its own
date of transition to Ind-ASs (1 April 1, 2014). However, the fact that
subsidiary O becomes a first-time adopter in 2014-15 does not change
the carrying amounts of its assets and liabilities in parent N’s
consolidated financial statements.
IG Example 9 Subsidiary adopts Ind-ASs before parent
Background
Parent P presents its (consolidated) first Ind-AS financial statements
in 2013-14. Its subsidiary Q, wholly owned by parent P since formation,
presented its first Ind-AS financial statements in 2011-12. Until 2013-
2014, subsidiary Q prepared information for internal consolidation
purposes in accordance with parent P’s previous GAAP.
Application of requirements
The carrying amounts of subsidiary Q’s assets and liabilities at 1 April
2013 are the same in both parent P’s (consolidated) opening Ind-AS
Balance Sheet and subsidiary Q’s financial statements (except for
adjustments for consolidation procedures) and are based on subsidiary
Q’s date of transition to Ind-ASs. The fact that parent P becomes a
first-time adopter in 2013-14 does not change those carrying amounts
(paragraph D17 of this Ind-AS).
IG30 Paragraphs D16 and D17 of this Ind-AS do not override the
following requirements:
(a) to apply Appendix C to this Ind-AS to assets acquired, and
liabilities assumed, in a business combination that occurred
before the acquirer’s date of transition to Ind-ASs. However,
the acquirer applies paragraph D17 to new assets acquired,
and liabilities assumed, by the acquiree after that business
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First-time Adoption of Indian Accounting Standards
combination and still held at the acquirer’s date of transition
to Ind-ASs.
(b) to apply the rest of this Ind-AS in measuring all assets and
liabilities for which paragraphs D16 and D17 are not
relevant.
(c) to give all disclosures required by this Ind-AS as of the
first-time adopter’s own date of transition to Ind-ASs.
IG31 Paragraph D16 of this Ind-AS applies if a subsidiary becomes a
first-time adopter later than its parent, for example if the subsidiary
previously prepared a reporting package in accordance with Ind-ASs
for consolidation purposes but did not present a full set of financial
statements in accordance with Ind-ASs. This may be relevant not only
when a subsidiary’s reporting package complies fully with the recognition
and measurement requirements of Ind-ASs, but also when it is adjusted
centrally for matters such as review of events after the reporting period
and central allocation of pension costs. For the disclosure required by
paragraph 26 of this Ind-AS, adjustments made centrally to an
unpublished reporting package are not corrections of errors. However,
paragraph D16 does not permit a subsidiary to ignore misstatements
that are immaterial to the consolidated financial statements of its parent
but material to its own financial statements.
Ind AS 29 Financial Reporting in
Hyperinflationary Economies
IG32 An entity complies with Ind AS 21 The Effects of Changes in
Foreign Exchange Rates in determining its functional currency and
presentation currency. When the entity prepares its opening Ind-AS
Balance Sheet, it applies Ind AS 29 to any periods during which the
economy of the functional currency or presentation currency was
hyperinflationary.
IG33 An entity may elect to use the fair value of an item of property,
plant and equipment at the date of transition to Ind-ASs as its deemed
Indian Accounting Standards
68
cost at that date (paragraph D5 of this Ind-AS), in which case it gives
the disclosures required by paragraph 30 of this Ind-AS.
IG34 If an entity elects to use the exemptions in paragraphs D5–D8 of
this Ind-AS, it applies Ind AS 29 to periods after the date for which the
revalued amount or fair value was determined.
Ind AS 32 Financial Instruments: Presentation
IG35 In its opening Ind-AS Balance Sheet, an entity applies the criteria
in Ind AS 32 to classify financial instruments issued (or components of
compound instruments issued) as either financial liabilities or equity
instruments in accordance with the substance of the contractual
arrangement when the instrument first satisfied the recognition criteria
in Ind AS 32 (paragraphs 15 and 30), without considering events after
that date (other than changes to the terms of the instruments).
IG36 For compound instruments outstanding at the date of transition
to Ind-ASs, an entity determines the initial carrying amounts of the
components on the basis of circumstances existing when the instrument
was issued (Ind AS 32 paragraph 30). An entity determines those
carrying amounts using the version of Ind AS 32 effective at the end of
its first Ind-AS reporting period. If the liability component is no longer
outstanding at the date of transition to Ind-ASs, a first-time adopter
need not separate the initial equity component of the instrument from
the cumulative interest accreted on the liability component (paragraph
D18 of this Ind-AS).
Ind AS 34 Interim Financial Reporting
IG37 Ind AS 34 applies if an entity is required, or elects, to present an
interim financial report in accordance with Ind-AS. Accordingly, neither
Ind AS 34 nor this Ind-AS requires an entity:
(a) to present interim financial reports that comply with Ind AS
34; or
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First-time Adoption of Indian Accounting Standards
(b) to prepare new versions of interim financial reports
presented in accordance with previous GAAP. However, if
an entity presents an interim financial report in accordance
with Ind AS 34 for part of the period covered by its first Ind-
AS financial statements, the entity restates the comparative
information presented in that report so that it complies with
Ind ASs, if an entity has opted to present the comparatives
in accordance with paragraph 21(b) of this Ind AS.
IG38 An entity applies this Ind-AS in each interim financial report that
it presents in accordance with Ind AS 34 for part of the period covered
by its first Ind-AS financial statements. In particular, paragraph 32 of
the Ind-AS 101 requires an entity to disclose various reconciliations
(see IG Example 10).
IG Example 10 Interim financial reporting
Background
Entity R’s first Ind-AS financial statements are for a period that ends on
31 March 2012, and its first interim financial report in accordance with
Ind AS 34 is for the quarter ended 30 June 2011. Entity R prepared
previous GAAP annual financial statements for the year ended 31 March
2011, and prepared quarterly reports throughout 2010-11.
Application of requirements
Situation A:
Where, an entity decides not to provide one year comparative period
in accordance with paragraph 21(a) of this Ind-AS; In each quarterly
interim financial report for 2011-12, entity R includes:
reconciliation of its equity reported in accordance with Ind-ASs to its
equity in accordance with previous GAAP as on 1 April 2011 being
the date of transition to Ind-ASs; and significant differences between
previous GAAP and Ind-AS in respect of its total comprehensive
income (or if it did not report such a total, profit or loss) for the
quarter ended 30 June 2011.
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70
Situation B:
Where, an entity decides to provide one year comparative period in
accordance with paragraph 21(b) of this Ind-AS; in each quarterly
interim financial report for 2011-12, entity R provides reconciliation:
(a) of its equity reported in accordance with Ind-ASs to its equity
in accordance with previous GAAP as on as on the date
of transition, i.e.,1 April 2010, and
(b) of its equity reported in accordance with Ind-ASs to Ind-
AS to its equity in accordance with previous GAAP as on
the deemed date of transition, i.e.,1 April 2010, and
(c) of its equity in accordance with Ind-AS at the end of the
comparable quarter of 2010-11 to its equity in accordance
with previous GAAP at that date; and
(d) of its total comprehensive income in accordance with Ind-
AS for the comparable quarter of 2010-11 (current and
year to date) to its total comprehensive income (or, if it
did not report such a total, profit or loss) in accordance
with previous GAAP.
Each of the above reconciliations gives sufficient detail to enable
users to understand the material adjustments to the Balance Sheet
and statement of comprehensive income. Entity R also explains the
material adjustments to the statement of cash flows.
If entity R becomes aware of errors made in accordance with previous
GAAP, the reconciliations distinguish the correction of those errors
from changes in accounting policies.
If entity R did not, in its most recent annual financial statements in
accordance with previous GAAP, disclose information material to an
understanding of the current interim period, its interim financial
reports for 2011-12 disclose that information or include a crossreference
to another published document that includes it (paragraph
33 of this Ind-AS).
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First-time Adoption of Indian Accounting Standards
Ind AS 36 Impairment of Assets and Ind AS 37
Provisions, Contingent Liabilities and
Contingent Assets
IG39 An entity applies Ind AS 36 in:
(a) determining whether any impairment loss exists at the date
of transition to Ind-ASs; and
(b) measuring any impairment loss that exists at that date, and
reversing any impairment loss that no longer exists at that
date. An entity’s first Ind-AS financial statements include
the disclosures that Ind AS 36 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 (paragraph 24(c) of this Ind-AS).
IG40 The estimates used to determine whether an entity recognises
an impairment loss or provision (and to measure any such impairment
loss or provision) at the date of transition to Ind-ASs are 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
(paragraphs 14 and 15 of this Ind-AS). The entity reports the impact of
any later revisions to those estimates as an event of the period in
which it makes the revisions.
IG41 In assessing whether it needs to recognise an impairment loss or
provision (and in measuring any such impairment loss or provision) at
the date of transition to Ind-ASs, an entity may need to make estimates
for that date that were not necessary in accordance with its previous
GAAP. Such estimates and assumptions do not reflect conditions that
arose after the date of transition to Ind-ASs (paragraph 16 of this Ind-
AS).
IG42 [Refer to Appendix 1].
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72
IG43 Ind AS 36 requires the reversal of impairment losses in some
cases. If an entity’s opening Ind-AS Balance Sheet reflects impairment
losses, the entity recognises any later reversal of those impairment
losses in profit or loss (except when Ind AS 36 requires the entity to
treat that reversal as a revaluation). This applies to both impairment
losses recognised in accordance with previous GAAP and additional
impairment losses recognised on transition to Ind-ASs.
Ind AS 38 Intangible Assets
IG44 An entity’s opening Ind-AS Balance Sheet:
(a) excludes all intangible assets and other intangible items
that do not meet the criteria for recognition in accordance
with Ind AS 38 at the date of transition to Ind-ASs; and
(b) includes all intangible assets that meet the recognition
criteria in Ind AS 38 at that date, except for intangible assets
acquired in a business combination that were not recognised
in the acquirer’s consolidated statement of Balance Sheet
in accordance with previous GAAP and also would not qualify
for recognition in accordance with Ind AS 38 in the separate
Balance Sheet of the acquiree (see paragraph C4 (f) of the
Ind-AS).
IG45 The criteria in Ind AS 38 require an entity to recognise an
intangible asset if, and only if:
(a) it is probable that the future economic benefits that are
attributable to the asset will flow to the entity; and
(b) the cost of the asset can be measured reliably.
Ind AS 38 supplements these two criteria with further, more
specific, criteria for internally generated intangible assets.
IG46 In accordance with paragraphs 65 and 71 of Ind AS 38, an entity
capitalises the costs of creating internally generated intangible assets
prospectively from the date when the recognition criteria are met. Ind
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First-time Adoption of Indian Accounting Standards
AS 38 does not permit an entity to use hindsight to conclude
retrospectively that these recognition criteria are met. Therefore, even
if an entity concludes retrospectively that a future inflow of economic
benefits from an internally generated intangible asset is probable and
the entity is able to reconstruct the costs reliably, Ind AS 38 prohibits it
from capitalising the costs incurred before the date when the entity
both:
(a) concludes, based on an assessment made and documented
at the date of that conclusion, that it is probable that future
economic benefits from the asset will flow to the entity; and
(b) has a reliable system for accumulating the costs of internally
generated intangible assets when, or shortly after, they are
incurred.
IG47 If an internally generated intangible asset qualifies for recognition
at the date of transition to Ind-ASs, an entity recognises the asset in its
opening Ind-AS Balance Sheet even if it had recognised the related
expenditure as an expense in accordance with previous GAAP. If the
asset does not qualify for recognition in accordance with Ind AS 38
until a later date, its cost is the sum of the expenditure incurred from
that later date.
IG48 The criteria discussed in paragraph IG45 also apply to an
intangible asset acquired separately. In many cases, contemporaneous
documentation prepared to support the decision to acquire the asset
will contain an assessment of the future economic benefits. Furthermore,
as explained in paragraph 26 of Ind AS 38, the cost of a separately
acquired intangible asset can usually be measured reliably.
IG49 For an intangible asset acquired in a business combination before
the date of transition to Ind-ASs, its carrying amount in accordance
with previous GAAP immediately after the business combination is its
deemed cost in accordance with Ind-ASs at that date (paragraph C4(e)
of this Ind-AS). If that carrying amount was zero, the acquirer does not
recognise the intangible asset in its consolidated opening Ind-AS Balance
Sheet, unless it would qualify in accordance with Ind AS 38, applying
the criteria discussed in paragraphs IG45–IG48, for recognition at the
Indian Accounting Standards
74
date of transition to Ind-ASs in the Balance Sheet of the acquiree
(paragraph C4(f) of this Ind-AS). If those recognition criteria are met,
the acquirer measures the asset on the basis that Ind AS 38 would
require in the Balance Sheet of the acquiree. The resulting adjustment
affects goodwill (paragraph C4(g)(i) of this Ind-AS).
IG50 A first-time adopter may elect to use the fair value of an intangible
asset at the date of an event such as a privatisation or initial public
offering as its deemed cost at the date of that event (paragraph D8 of
this Ind-AS), provided that the intangible asset qualifies for recognition
in accordance with Ind AS 38 (paragraph 10 of this Ind-AS). In addition,
if, and only if, an intangible asset meets both the recognition criteria in
Ind AS 38 (including reliable measurement of original cost) and the
criteria in Ind AS 38 for revaluation (including the existence of an active
market), a first-time adopter may elect to use one of the following
amounts as its deemed cost (paragraph D7 of this Ind-AS):
(a) fair value at the date of transition to Ind-ASs (paragraph D5
of this Ind-AS), in which case the entity gives the disclosures
required by paragraph 30 of this Ind-AS; or
(b) revaluation in accordance with previous GAAP that meets
the criteria in paragraph D6 of this Ind-AS.
IG51 If an entity’s amortisation methods and rates in accordance with
previous GAAP would be acceptable in accordance with Ind-ASs, the
entity does not restate the accumulated amortisation in its opening Ind-
AS Balance Sheet. Instead, the entity accounts for any change in
estimated useful life or amortisation pattern prospectively from the period
when it makes that change in estimate (paragraph 13 of this Ind-AS
and paragraph 104 of Ind AS 38). However, in some cases, an entity’s
amortisation methods and rates in accordance with previous GAAP may
differ from those that would be acceptable in accordance with Ind-ASs
(for example, if they were adopted solely for tax purposes and do not
reflect a reasonable estimate of the asset’s useful life). If those
differences have a material effect on the financial statements, the entity
adjusts the accumulated amortisation in its opening Ind-AS Balance
Sheet retrospectively so that it complies with Ind-ASs (paragraph 14 of
this Ind-AS). However, if an entity uses the exemption in paragraph
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First-time Adoption of Indian Accounting Standards
D8B, it uses the carrying amount of the intangible asset at the date of
transition to Ind-ASs as deemed cost as if it had acquired an intangible
asset with the same remaining service potential for that amount at the
date of transition to Ind-ASs. Subsequent amortisation is based on that
deemed cost and starts from the date of transition to Ind-ASs.
Ind AS 39 Financial Instruments: Recognition
and Measurement
IG52 An entity recognises and measures all financial assets and
financial liabilities in its opening Ind-AS. Balance Sheet in accordance
with Ind AS 39, except as specified in paragraphs B2–B6 of this Ind-
AS, which address derecognition and hedge accounting.
Recognition
IG53 An entity recognises all financial assets and financial liabilities
(including all derivatives) that qualify for recognition in accordance with
Ind AS 39 and have not yet qualified for derecognition in accordance
with Ind AS 39, except non-derivative financial assets and non-derivative
financial liabilities derecognised in accordance with previous GAAP
before date of transition, to which the entity does not choose to apply
paragraph B3 (see paragraphs B2 and B3 of this Ind-AS). For example,
an entity that does not apply paragraph B3 does not recognise assets
transferred in a securitisation, transfer or other derecognition transaction
that occurred before date of transition if those transactions qualified for
derecognition in accordance with previous GAAP. However, if the entity
uses the same securitisation arrangement or other derecognition
arrangement for further transfers after date of transition, those further
transfers qualify for derecognition only if they meet the derecognition
criteria of Ind AS 39 .
IG54 An entity does not recognise financial assets and financial
liabilities that do not qualify for recognition in accordance with Ind AS
39 or have already qualified for derecognition in accordance with Ind
AS 39 .
Indian Accounting Standards
76
Embedded derivatives
IG55 When Ind AS 39 requires an entity to separate an embedded
derivative from a host contract , the initial carrying amounts of the
components at the date when the instrument first satisfies the recognition
criteria in Ind AS 39 reflect circumstances at that date (Ind AS 39
paragraph 11). If the entity cannot determine the initial carrying amounts
of the embedded derivative and host contract reliably, it designates the
entire combined contract as at fair value through profit or loss (Ind AS
39 paragraph 12).This results in fair value measurement (except when
the entity cannot determine a reliable fair value, see Ind AS 39 paragraph
51(c), with changes in fair value recognised in profit or loss.
Measurement
IG56 In preparing its opening Ind-AS Balance Sheet, an entity applies
the criteria in Ind AS 39 to identify those financial assets and financial
liabilities that are measured at fair value and those that are measured
at amortised cost. In particular:
(a) to comply with Ind AS 39 paragraph 51, classification of
financial assets as held-to-maturity investments relies on a
designation made by the entity in applying Ind AS 39
reflecting the entity’s intention and ability at the date of
transition to Ind-ASs. It follows that sales or transfers of
held-to-maturity investments before the date of transition to
Ind-ASs do not trigger the ‘tainting’ rules in Ind AS 39
paragraph 9.
(b) to comply with Ind AS 39 paragraph 9, the category of ‘loans
and receivables’ refers to the circumstances when the
financial asset first satisfied the recognition criteria in Ind
AS 39.
(c) in accordance with Ind AS 39 paragraph 9, derivative
financial assets and derivative financial liabilities are always
deemed held for trading (except for a derivative that is a
financial guarantee contract or a designated and effective
hedging instrument). The result is that an entity measures
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First-time Adoption of Indian Accounting Standards
at fair value all derivative financial assets and derivative
financial liabilities that are not financial guarantee contracts.
(d) to comply with Ind AS 39 paragraph 50, an entity classifies
a non-derivative financial asset or non-derivative financial
liability in its opening Ind-AS Balance Sheet as at fair value
through profit or loss only if the asset or liability was:
i. acquired or incurred principally for the purpose of
selling or repurchasing it in the near term;
ii. at the date of transition to Ind-ASs, part of a portfolio
of identified financial instruments that were managed
together and for which there was evidence of a recent
actual pattern of short-term profit-taking; or
iii. designated as at fair value through profit or loss at
the date of transition to Ind-ASs.
(e) to comply with Ind AS 39 paragraph 9, available-for-sale
financial assets are those non-derivative financial assets
that are designated as available for sale and those nonderivative
financial assets that are not in any of the previous
categories.
IG57 For those financial assets and financial liabilities measured at
amortised cost in the opening Ind-AS Balance Sheet, an entity
determines their cost on the basis of circumstances existing when the
assets and liabilities first satisfied the recognition criteria in Ind AS 39.
However, if the entity acquired those financial assets and financial
liabilities in a past business combination, their carrying amount in
accordance with previous GAAP immediately following the business
combination is their deemed cost in accordance with Ind-ASs at that
date (paragraph C4(e) of this Ind-AS).
IG58 An entity’s estimates of impairments of financial assets measured
at amortised cost at the date of transition to Ind-ASs are consistent
with estimates made for the same date in accordance with previous
GAAP (after adjustments to reflect any difference in accounting policies),
Indian Accounting Standards
78
unless there is objective evidence that those assumptions were in error
(paragraph 14 of this Ind-AS). The entity treats the impact of any later
revisions to those estimates as impairment losses (or, if the criteria in
Ind AS 39 are met, reversals of impairment losses) of the period in
which it makes the revisions.
Transition adjustments
IG58A An entity shall treat an adjustment to the carrying amount of a
financial asset or financial liability as a transition adjustment to be
recognised in the opening balance of retained earnings at the date of
transition to Ind-ASs only to the extent that it results from adopting Ind
AS 39. Because all derivatives, other than those that are financial
guarantee contracts or are designated and effective hedging instruments,
are classified as held for trading, the differences between the previous
carrying amount (which may have been zero) and the fair value of the
derivatives are recognised as an adjustment of the balance of retained
earnings at the transition date (other than for a derivative that is a
financial guarantee contract or a designated and effective hedging
instrument).
IG58B Ind AS 8 applies to adjustments resulting from changes in
estimates. If an entity is unable to determine whether a particular portion
of the adjustment is a transition adjustment or a change in estimate, it
treats that portion as a change in accounting estimate in accordance
with Ind AS 8, with appropriate disclosures (Ind AS 8 paragraphs
32–40).
IG59 An entity may, in accordance with its previous GAAP, have
measured investments at fair value and recognised the revaluation gain
outside profit or loss. If an investment is classified as at fair value
through profit or loss, the pre- Ind AS 39 revaluation gain that had been
recognised outside profit or loss is reclassified into retained earnings
on initial application of Ind AS 39. If, on initial application of Ind AS 39,
an investment is classified as available-for-sale then the pre- Ind AS 39
revaluation gain is recognised in a separate component of equity.
Subsequently, the entity recognises gains and losses on the availablefor-
sale financial asset in other comprehensive income and accumulates
the cumulative gains and losses in that separate component of equity
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First-time Adoption of Indian Accounting Standards
until the investment is impaired, sold, collected or otherwise disposed
of. On subsequent derecognition or impairment of the available-for-sale
financial asset, the entity reclassifies to profit or loss the cumulative
gain or loss remaining in equity (Ind AS 39, paragraph 61(b)).
Hedge accounting
IG60 Paragraphs B4–B6 of this Ind-AS deal with hedge accounting.
The designation and documentation of a hedge relationship must be
completed on or before the date of transition to Ind-ASs if the hedge
relationship is to qualify for hedge accounting from that date. Hedge
accounting can be applied prospectively only from the date that the
hedge relationship is fully designated and documented.
IG60A An entity may, in accordance with its previous GAAP, have
deferred or not recognised gains and losses on a fair value hedge of a
hedged item that is not measured at fair value. For such a fair value
hedge, an entity adjusts the carrying amount of the hedged item at the
date of transition to Ind-ASs. The adjustment is the lower of:
(a) that portion of the cumulative change in the fair value of
the hedged item that ref lects the designated hedged risk
and was not recognised in accordance with previous GAAP;
and
(b) that portion of the cumulative change in the fair value of
the hedging instrument that reflects the designated hedged
risk and, in accordance with previous GAAP, was either
(i)not recognised or (ii) deferred in the Balance Sheet as an
asset or liability.
IG60B An entity may, in accordance with its previous GAAP, have
deferred gains and losses on a cash flow hedge of a forecast transaction.
If, at the date of transition to Ind-ASs, the hedged forecast transaction
is not highly probable, but is expected to occur, the entire deferred gain
or loss is recognised in equity. Any net cumulative gain or loss that has
been reclassified to equity on initial application of Ind AS 39 remains in
equity until (a) the forecast transaction subsequently results in the
recognition of a non-financial asset or non-financial liability, (b) the
Indian Accounting Standards
80
forecast transaction affects profit or loss or (c) subsequently
circumstances change and the forecast transaction is no longer expected
to occur, in which case any related net cumulative gain or loss is
reclassified from equity to profit or loss. If the hedging instrument is
still held, but the hedge does not qualify as a cash flow hedge in
accordance with Ind AS 39 hedge accounting is no longer appropriate
starting from the date of transition to Ind-ASs.
Ind AS 40 Investment Property
IG61 [Refer to Appendix 1]
IG62 In respect of investment property accounted for in accordance
with Ind AS 40, an entity applies paragraphs IG7–IG13 on property,
plant and equipment.
Ind AS 105 Non-current Assets Held for Sale
and Discontinued Operations
IG62A Ind AS 105 requires that an entity shall classify a non-current
asset (or disposal group) as held for sale if its carrying amount will be
recovered principally through a sale transaction rather than through
continuing use as at the date of transition to Ind-AS. However a first
time adopter may measure non-current assets (or disposal groups) that
meet the criteria to be classified as held for sale or for distribution to
the owners and operations as at the date of transition to Ind-AS rather
than going back to the date when the criteria to classify a non-current
asset (or disposal group) as held for sale is met.
Explanation of transition to Ind-ASs
IG63 Paragraphs 24(a), (b) and (d), 25 and 26 of this Ind-AS require a
first-time adopter to provide certain disclosures that give sufficient detail
to enable users to understand the material adjustments to the Balance
Sheet, statement of profit and loss and, if applicable, statement of cash
flows.
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First-time Adoption of Indian Accounting Standards
The following two examples relate to a situation where an entity has elected
to apply paragraph 21(b):
IG Example 11A shows one way of satisfying requirements of paragraph
24(a) i.e reconciliation of equity at the date of transition to Ind-AS and
reconciliation of total comprehensive income.
IG Example 11B shows another way of satisfying requirements of paragraph
24(a) i.e reconciliation of equity at the date of transition to Ind-AS, and 24
(d) i.e reconciliation of equity and total comprehensive Income for the
comparative year.
Paragraph 24(a), and (b) requires specific reconciliations of equity and total
comprehensive income where an entity elects to apply paragraph 21(a).
IG Example 11C shows one way of satisfying requirements of paragraph
24(a) i.e reconciliation of equity at the date of transition to Ind-AS, and
24(b) i.e reconciliation of equity and total comprehensive income for the
year of transition to Ind-AS .
IG Example 11A Reconciliation of equity and total comprehensive
income.
Background
An entity first adopted Ind-ASs in 2011-12, with a date of transition to
Ind-ASs of 1 April 2011. Its last financial statements in accordance with
previous GAAP were for the year ended 31 March 2011.
Application of requirements
The entity’s first Ind-AS financial statements include the reconciliations
and related notes shown below.
Among other things, this example includes a reconciliation of equity at
the date of transition to Ind-ASs (1 April 2011).
In practice, it may be helpful to include cross-references to accounting
policies and supporting analyses that give further explanation of the
adjustments shown in the reconciliations below.
Indian Accounting Standards
82
If a first-time adopter becomes aware of errors made in accordance with
previous GAAP, the reconciliations distinguish the correction of those
errors from changes in accounting policies (paragraph 26 of this Ind-
AS). This example does not illustrate disclosure of a correction of an
error.
Reconciliation of equity at 1 April 2011 (date of transition to Ind-
ASs) –
Notes Reclassified Effect of
Previous transition Ind-
GAAP to Ind-ASs ASs
Rs Rs Rs
1 Property, plant and equipment 8,299 100 8,399
2 Goodwill 1,220 150 1,370
2 Intangible assets 208 (150) 58
3 Financial assets 3,471 420 3,891
Total non-current assets 13,198 520 13,718
Trade and other receivables 3,710 0 3,710
4 Inventories 2,962 400 3,362
5 Other receivables 333 431 76
Cash and cash equivalents 748 0 748
Total current assets 7,753 831 8,584
Total assets 20,951 1,351 22,302
Interest-bearing loans 9,396 0 9,396
Trade and other payables 4,124 0 4,124
6 Employee benefits 0 66 66
7 Restructuring provision 250 (250) 0
Current tax liability 42 0 42
8 Deferred tax liability 579 460 1,039
Total liabilities 14,391 276 14,667
Total assets less total liabilities 6,560 1,075 7,635
Issued capital 1,500 0 1,500
3 Other reserves 0 294 294
5,9 Retained earnings 5,060 781 5,841
Total equity 6,560 1,075 7,635
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First-time Adoption of Indian Accounting Standards
Notes to the reconciliation of equity at 1 April 2011:
1. Depreciation was influenced by tax requirements in accordance
with previous GAAP, but in accordance with Ind-ASs reflects the
useful life of the assets. The cumulative adjustment increased the
carrying amount of property, plant and equipment by Rs. 100.
2. Intangible assets in accordance with previous GAAP included
Rs 150 for items that are transferred to goodwill because they do
not qualify for recognition as intangible assets in accordance with
Ind-ASs
3. Financial assets are all classified as at available for sale in
accordance with Ind-ASs and are carried at their fair value of Rs
3,891. They were carried at cost of Rs 3,471 in accordance with
previous GAAP. The resulting gain of Rs 294 (Rs 420, less related
deferred tax of Rs 126) is included in the other reserves.
4. Inventories include fixed and variable production overhead of Rs
400 in accordance with Ind-ASs, but this overhead was excluded
in accordance with previous GAAP.
5. Unrealised gains of Rs 431 on unmatured forward foreign exchange
contracts are recognised in accordance with Ind-ASs, but were
not recognised in accordance with previous GAAP. The resulting
gains of Rs 302 (Rs 431, less related deferred tax of Rs 129) are
included in the retained earnings.
6. A pension liability of Rs 66 is recognised in accordance with Ind-
ASs, but was not recognised in accordance with previous GAAP,
which used a cash basis.
7. A restructuring provision of Rs 250 relating to head office activities
was recognised in accordance with previous GAAP, but does not
qualify for recognition as a liability in accordance with Ind-ASs.
8. The above changes increased the deferred tax liability as follows:
Rs
Other reserves (note 3) 126
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84
Retained earnings 334
Increase in deferred tax liability 460
Because the tax base at 1 April 2011 of the items reclassified
from intangible assets to goodwill (note 2) equaled their carrying
amount at that date, it is assumed for the purposes of this
illustration that the reclassification did not affect deferred tax
liabilities.
9. The adjustments to retained earnings are as follows
Rs
Depreciation (note 1) 100
Production overhead (note 4) 400
Pension liability (note 6) (66)
Restructuring provision (note 7) 250
Unrealised gain on forward contracts (note 5) 431
Tax effect of the above (334)
Total adjustment to retained earnings 781
Reconciliation of total comprehensive income for 2011-12:
Note Reclassified Effect of
Previous transition
GAAP to Ind-ASs Ind-ASs
Rs Rs Rs
Revenue 20,910 (47) 20,863
1 Cost of sales (15,283) – (15,283)
2 Employee benefits (1,907) (130) (2,037)
4 Other expenditure (2,842) (150) (2,992)
5 Forward contract – (40) (40)
Finance income 1,446 – 1,446
6 Finance costs (1,902) 7 (1,895)
Profit before tax 422 (360) 62
8 Tax expense (148) 120 (28)
Profit (loss) for the year 274 (240) 34
7 Available-for-sale financial
assets – 180 180
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First-time Adoption of Indian Accounting Standards
8 Tax relating to other
comprehensive income – (60) (60)
Other comprehensive
income – 120 120
Total comprehensive
income 274 (120) 154
Notes to the reconciliation of total comprehensive income for
Year 2011-12:
1 Revenue under Ind-AS is lower by Rs.47 because fair value
of revenue allocated to customer loyalty programme has been
deferred in accordance with Ind-ASs but not in accordance
with previous GAAP.
2 A termination benefit is recognised in accordance with
Ind-AS, but was not to be recognised in accordance with
previous GAAP. The pension liability increased by Rs. 130
during 2011-12.
3 Depreciation was influenced by tax requirements in accordance
with previous GAAP, but reflects the useful life of the assets
in accordance with Ind-ASs. The effect on the profit for 2011-
12 was not material.
4 A restructuring provision of Rs 150 which was accounted in
accordance with previous GAAP prior to transition date i.e
April 1, 2011 in this example, but did not qualify for recognition
in accordance with Ind-ASs until subsequent to the transition
date. This increases administrative expenses for 2011-12 in
accordance with Ind-ASs.
5 Forward exchange contracts are fair valued as at each balance
sheet date under Ind-AS. The fair value of forward foreign
exchange contracts decreased by Rs 40 during 2011-12.
6 Finance cost decreased by Rs. 7 on under Ind-AS on application of
effective interest rate method.
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86
7 Available-for-sale financial assets carried at fair value in
accordance with Ind-ASs increased in value by Rs 180 during
2011-12. They were carried at cost in accordance with previous
GAAP. Fair value changes have been included in other
comprehensive income.
8 Adjustments 1-6 above lead to a reduction of Rs 120 in
deferred tax expenses and adjustment 7 above lead to an
increase of Rs 60 in deferred tax expense recognized in other
comprehensive income.
Explanation of material adjustments to the statement of cash
flows for 2011-12
Income taxes of Rs 133 paid during 2011-12 are classified as
operating cash flows in accordance with Ind-ASs, but were included
in a separate category of tax cash flows in accordance with previous
GAAP. There are no other material differences between the statement
of cash flows presented in accordance with Ind-ASs and the statement
of cash flows presented in accordance with previous GAAP.
IG Example 11B Format for reconciliation in accordance with
paragraph 24(a) and (d) for an entity that elects to apply
paragraph 21(b)
A. Reconciliation of equity:
For the Year ended April 1, March April 1,
2010 31, 2011 2011
Equity in accordance with Ind-AS xxx xxx Xxx
Reconciling GAAP differences
Property, Plant and Equipment
(note x) xx xx xx
Inventory (note x) xx xx xx
Employee benefits (note x) xx xx xx
Restructuring provision (note x) xx xx xx
Financial Assets (note x) xx xx xx
Unpaid Dividend (xx) (xx) (xx)
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First-time Adoption of Indian Accounting Standards
Deferred Tax Liabilities (note x) (xx) (xx) (xx)
Total adjustment to equity xx xx xx
Equity in accordance with previous
GAAP as per the most recent
annual financial statements xx xx xx
Provide explanatory note to reconciling items on the lines of example
11A above.
B. Reconciliation of total comprehensive income:
For the Year ended March 31, 2011
Total comprehensive income in accordance
with Ind-AS xxx
Reconciling GAAP differences:
Depreciation (note x) xx
Production overhead (note x) xx
Pension liability (note x) xx
Restructuring provision (note x) xx
Unrealised gain on forward contracts (note x) xx
Tax effect of the above (note x) (xx)
Adjustment to total comprehensive income xx
Profit and Loss in accordance with previous
GAAP as per the most recent annual financial
statements xx
Provide explanatory note to reconciling items on the lines of example
11A above.
Indian Accounting Standards
88
IG Example 11C Format for reconciliation in accordance with
paragraph 24(a) and (b) for an entity that elects to apply paragraph
21(a)
A. Reconciliation of equity:
For the Year ended April 1, 2011
Equity in accordance with Ind-AS xxx
Reconciling GAAP differences
Property, Plant and Equipment (note x) xx
Inventory (note x) xx
Employee benefits (note x) xx
Restructuring provision (note x) xx
Financial Assets (note x) xx
Unpaid Dividend (xx)
Deferred Tax Liabilities (note x) (xx)
Total adjustment to equity xx
Equity in accordance with previous GAAP as per
the most recent annual financial statements xx
Provide explanatory note to reconciling items on the lines of example
11A above.
B. Reconciliation of total comprehensive income:
For the Year ended March 31, 2012
Total comprehensive Income in accordance
with Ind-AS xxx
Significant GAAP differences:
Depreciation (note x) xx
Production overhead (note x) xx
Pension liability (note x) xx
Restructuring provision (note x) xx
Unrealised gain on forward contracts (note x) xx
Tax effect of the above (note x) (xx)
Adjustment to total comprehensive income Xx
Profit and Loss in accordance with previous GAAP Xx
Provide explanatory note to reconciling items on the lines of example
11A above.
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First-time Adoption of Indian Accounting Standards
Ind AS 102 Share-based Payment
IG64 A first-time adopter is encouraged, but not required, to apply Ind
AS 102 Share-based Payment to equity instruments that were vested
before the date of transition to Ind-ASs.
IG65 For example, if an entity’s date of transition to Ind_ASs is 1 April
2011, the entity applies Ind AS 102 to shares, share options or other
equity instruments that had not yet vested at 1 April 2011.
[Paragraphs IG66–IG200 reserved for possible guidance on future
standards]
Appendices to Indian Accounting Standards
Appendix A to Ind AS 16 Changes in Existing
Decommissioning, Restoration and Similar Liabilities
IG201 Ind AS 16 requires the cost of an item of property, plant and
equipment to include the initial estimate of the costs of dismantling and
removing the asset and restoring the site on which it is located. Ind AS
37 requires the liability, both initially and subsequently, to be measured
at the amount required to settle the present obligation at the end of the
reporting period, reflecting a current market-based discount rate.
IG202 Appendix A to Ind AS 16 requires that, subject to specified
conditions, changes in an existing decommissioning, restoration or
similar liability are added to or deducted from the cost of the related
asset. The resulting depreciable amount of the asset is depreciated
over its useful life, and the periodic unwinding of the discount on the
liability is recognised in profit or loss as it occurs.
IG203 Paragraph D21 of Ind-AS 101 provides a transitional exemption.
Instead of retrospectively accounting for changes in this way, entities
can include in the depreciated cost of the asset an amount calculated
by discounting the liability at the date of transition to Ind-ASs back to,
and depreciating it from, when the liability was first incurred. IG Example
201 illustrates the effect of applying this exemption, assuming that the
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90
entity accounts for its property, plant and equipment using the cost
model.
IG Example 201 Changes in existing decommissioning,
restorationand similar liabilities
Background
An entity’s first Ind-AS financial statements are for a period that
ends on 31 March 2012 and with transition date of 1 April, 2011.
The entity acquired an energy plant on 1 April 2008, with a life of 40
years. As at the date of transition to Ind-ASs, the entity estimates
the decommissioning cost in 37 years’ time to be Rs 470, and
estimates that the appropriate risk-adjusted discount rate for the
liability is 5 per cent. It judges that the appropriate discount rate has
not changed since 1 April 2008.
Application of requirements
The decommissioning liability recognised at the transition date is
Rs77 (Rs 470 discounted for 37 years at 5 per cent).
Discounting this liability back for a further three years to 1 April
2008 gives an estimated liability at acquisition, to be included in the
cost of the asset, of Rs 67. Accumulated depreciation on the asset
is Rs 67 × 3/40 = Rs 5.
The amounts recognised in the opening Ind-AS Balance Sheet on
the date of transition to Ind-ASs (1 April, 2011) are, in summary:
Rs
Decommissioning cost included in cost of plant 67
Accumulated depreciation (5)
Decommissioning liability (77)
Net assets/retained earnings (15)
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First-time Adoption of Indian Accounting Standards
Appendix C to Ind AS 17 Determining whether an
Arrangement contains a Lease
IG204 Appendix C to Ind AS 17 specifies criteria for determining, at
the inception of an arrangement, whether the arrangement contains a
lease. It also specifies when an arrangement should be reassessed
subsequently.
IG205 Paragraph D9 of the Ind-AS provides a transitional exemption.
Instead of determining retrospectively whether an arrangement contains
a lease at the inception of the arrangement and subsequently
reassessing that arrangement as required in the periods before transition
to Ind-ASs, entities may determine whether arrangements in existence
on the date of transition to Ind-ASs contain leases by applying
paragraphs 6–9 of Appendix C to Ind AS 17 to those arrangements on
the basis of facts and circumstances existing on that date.
IG Example 202 Determining whether an arrangement contains a
lease
Background
An entity’s first Ind-AS financial statements are for a period that
ends on 31 March 2012. Its date of transition to Ind-ASs is therefore
1 April 2011.
On 1 April 2010 the entity entered into a take-or-pay arrangement to
supply gas. On 1 April 2011, there was a change in the contractual
terms of the arrangement.
Application of requirements
On 1 April 2011 the entity may determine whether the arrangement
contains a lease by applying the criteria in paragraphs 6–9 of
Appendix C to Ind AS 17 on the basis of facts and circumstances
existing on that date. Alternatively, the entity applies those criteria
on the basis of facts and circumstances existing on 1 April 2010 and
reassesses the arrangement on 1 April 2011. If the arrangement is
Indian Accounting Standards
92
determined to contain a lease, the entity follows the guidance in
paragraphs IG14–IG16.
IG206 Paragraph D9A of Ind-AS 101 provides a transitional exemption
in addition to that discussed in paragraph IG205. The exemption in
paragraph D9A applies only to arrangements that were assessed in the
same manner as required by Appendix C to Ind AS 17. If arrangements
exist at the date of transition to Ind-ASs that an entity did not assess
under previous GAAP in the same manner as required by Appendix C
to Ind AS 17 to determine whether they contain a lease, the entity may
apply the transition exemption discussed in paragraph IG205.
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First-time Adoption of Indian Accounting Standards
Appendix 1
Comparison with IFRS 1, First-time Adoption of
International Financial Reporting Standards
Note: This Appendix is not a part of the Indian Accounting Standard
(Ind AS) 101, First-time Adoption of Indian Accounting Standards. The
purpose of this Appendix is only to highlight differences between Ind
AS 101 and corresponding International Financial Reporting Standard
(IFRS) 1, First-time Adoption of International Financial Reporting
Standards.
1 Paragraph 3 of Ind-AS 101 specifies that an entity’s first Ind-AS
financial statements are the first annual financial statements in which
the entity adopts Ind-ASs in accordance with Ind-ASs notified under the
Companies Act, 1956 whereas IFRS 1 provides various examples of
first IFRS financial statements.
2 Paragraph 4 of IFRS 1 provides various examples of instances
when an entity does not apply this IFRS. Ind AS 101 does not provides
the same. In order to maintain consistency with paragraph numbers of
IFRS 1, the paragraph number is retained in Ind AS 101.
3 Paragraph 32 (c) of IFRS 1 has been deleted in Ind AS 101 and
included as paragraph 32A as a consequence of redrafting of the paragraph
32 in Ind AS 101. In order to maintain consistency with paragraph numbers
of IFRS 1, the paragraph number is retained in Ind AS 101.
4 IFRS 1 defines transitional date as beginning of the earliest period
for which an entity presents full comparative information under IFRS. It
is this date which is the starting point for IFRS and it is on this date the
cumulative impact of transition is recorded based on assessment of
conditions at that date by applying the standards retrospectively except
to the extent specifically provided in this standard as optional exemptions
and mandatory exceptions.
Ind-AS 101, however, provides that the date of transition is the beginning
of the current period and in addition provides an option to present
Indian Accounting Standards
94
comparative financial statements in accordance with Ind-AS on a
memorandum basis.
Arising from this fundamental change, there are other consequential
changes to Ind-AS 101. For example, disclosures required under
paragraph 21 and reconciliations under paragraphs 24 to 26, Ind-AS
101 have been modified to accommodate this option available under
Ind-AS 101. In addition, these have been modified to include the latest
corresponding previous periods’ financial statements as per the previous
GAAP when presenting its first Ind-AS financial statements. The relevant
Implementation Guidance and illustrative examples have been
appropriately modified to reflect the option provided to transitioning
entities.
5 IFRS 1 defines previous GAAP as the basis of accounting that a
first-time adopter used immediately before adopting IFRS.
Ind-AS 101, however, defines previous GAAP as the basis of accounting
that a first-time adopter used immediately before adopting Ind-AS for
complying with the reporting requirements in India.
The change makes it mandatory for Indian entities to consider the
financial statements prepared in accordance with existing notified Indian
accounting standards as was applicable to them as previous GAAP
when it transitions to Ind-AS.
6 Paragraph 22 of IFRS 1 requires specific disclosures if the entity
provides non-IFRS comparative information and historical summaries.
Such disclosures are not required under Ind-AS 101. In order to maintain
consistency with paragraph numbers of IFRS 1, the paragraph number
is retained in Ind AS 101.
7 IFRS requires reconciliations for opening equity, total comprehensive
income, cash flow statement and closing equity for the comparative period
to explain the transition to IFRS from previous GAAP.
Ind-AS 101, provides an option to provide a comparative period financial
statements on memorandum basis. Accordingly, entities that do not
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First-time Adoption of Indian Accounting Standards
provide comparatives need not provide reconciliation for total
comprehensive income, cash flow statement and closing equity in the
first year of transition but are expected to disclose significant differences
pertaining to total comprehensive income. Entities that provide
comparatives would have to provide reconciliations which are similar to
IFRS.
8 All transitional provisions related to Ind ASs, wherever considered
appropriate have been included in Ind AS 101. The following paragraphs
provides the transitional provisions which are included in the other Ind
ASs:
(i) Paragraph D4 includes the transitional provisions of IFRS 4;
(ii) Paragraph D22 includes the transitional provisions of
IFRIC 12.
9 IFRS 1 provides for various optional exemptions that an entity
can seek while an entity transitions to IFRS from its previous GAAP.
Similar provisions have been retained under Ind-AS 101. However,
there are few changes that have been made, which can be broadly
categorized as follows:
(a) Elimination of effective dates prior to transition date. IFRS
1 provides for various dates from which a standard could
have been implemented. For example,
• Paragraph B2 of IFRS 1 provides that, an entity would
have had to adopt the de-recgonition requirements for
transactions entered after 1 January, 2004. 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;
• Paragraph D2 of IFRS 1 provides that an entity is
encouraged, but not required, to apply IFRS 2 Sharebased
Payment to equity instruments that were granted
on or before 7 November 2002 or to instruments that
Indian Accounting Standards
96
were granted after 7 November 2002 and vested before
the later of (a) the date of transition to IFRSs and (b)
1 January 2005. 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;
(b) Deletion of certain exemptions not relevant for India. Certain
instances of such items are as follows:
• Paragraph D10 of IFRS 1 provides an entity that
adopted the corridor approach for recording actuarial
gain and losses arising from accounting for employee
obligations with an option to recognize the entire such
gain or loss to retained earnings, at the date of
transition, rather than requiring them to split such gains
and losses as recognized and unrecognized gains and
losses. In India, since corridor approach is not elected,
the resultant first time transition provision has been
deleted. In order to maintain consistency with
paragraph numbers of IFRS 1, the paragraph number
is retained in Ind AS 101;
• Paragraph D23 of IFRS 1 provides for transitional
adjustment requiring companies to apply the provisions
of IAS 23 to be applied prospectively after the transition
date. However, this was considered as not relevant in
Indian situation as Ind AS 23 AS 16 always required
an entity to capitalize borrowing costs as compared to
IAS 23 where it provided an option to expense out
such borrowing cost. Consequently, paragraphs IG 23
and IG 24 have also been deleted. In order to maintain
consistency with paragraph numbers of IFRS 1, the
paragraph numbers are retained in Ind AS 101, and
(c) Inclusion/modification of existing exemptions to make it
relevant for India. For example,
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First-time Adoption of Indian Accounting Standards
• Paragraph D7A has been added to provide for
transitional relief from the retrospective application of
Ind AS 16: Property, Plant and Equipment. Paragraph
D7A provides an entity option to use carrying values
of all such assets as on the date of transition in
accordance with previous GAAP as an acceptable
starting point under Ind-AS. Paragraph 27B has been
included in Ind AS 101 which requires the disclosure
that if an entity adopts for first time exemption the
option provided in accordance with paragraph D7A,
the fact and the accounting policy shall be disclosed
by the entity until such time that significant block of
such assets is fully depreciated or derecognised from
the entity’s Balance Sheet.
• Paragraph D9 provides for transitional relief from
retrospective application of paragraphs 6-9 of the
Appendix C of Ind AS 17.
• Paragraph D11A has been added to provide the
transitional relief from the retrospective application of
Ind AS 19 that 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 as Ind AS 19 requires
recognition of actuarial gains and losses for postemployment
defined benefit plans and other long-term
employment benefit plans in other comprehensive
income immediately and are not reclassified to profit
or loss in a subsequent period.
• Paragraph D13 A has been added to provide exemption
as a consequence of optional treatment for certain
exchange differences given in Ind AS 21.
• Paragraph D19A has been added to provide that the
financial instruments carried at amortised cost should
be measured in accordance with Ind-AS 39 from the
Indian Accounting Standards
98
date of recognition of financial instruments unless it is
impracticable (as defined in Ind AS 8) for an entity to
apply retrospectively the effective interest method or
the impairment requirements in paragraphs 58–65 and
AG84–AG93 of Ind AS 39.If it is impracticable then
the fair value of the financial instrument at the date of
transition to Ind-ASs shall be the new amortised cost
of that financial instrument at the date of transition to
Ind-ASs.
• D19B has been added to provide that financial
instruments measured at fair value shall be measured
at fair value as on the date of transition to Ind-AS.
• Paragraph D-26 has been added to provide for
transitional relief while applying Ind AS 105 – Noncurrent
Assets Held for Sale and Discontinued
Operations. Paragraph D26 provides an entity to use
the transitional date circumstances to measure such
assets or operations at the lower of carrying value
and fair value less cost to sell.
10 Paragraphs IG 15 and IG 16 of Appendix F have been deleted in
Ind AS 101 as they are with reference to the earlier version of Ind AS
17, hence are not relevant. In order to maintain consistency with
paragraph numbers of IFRS 1, the paragraph numbers are retained in
Ind AS 101.
11 Paragraphs IG 18 and IG 42 of Appendix F has been deleted in
Ind AS 101 as these are not relevant. In order to maintain consistency
with paragraph number of IFRS 1, the paragraph numbers are retained
in Ind AS 101.
12 Paragraph IG 61 has been deleted in Ind AS 101 as it is with
reference to fair value model which is not permitted under Ind AS 40. In
order to maintain consistency with of paragraph number of IFRS 1 , the
same is retained in Ind AS 101
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First-time Adoption of Indian Accounting Standards
13 Different terminology is used in this standard, e.g., the term
‘balance sheet’ is used instead of ‘Statement of financial position’ and
‘Statement of profit and loss’ is used instead of ‘Statement of
comprehensive income’.
14 Paragraph IG 25 of Appendix F appears as ‘Deleted ‘in IFRS 1.
In order to maintain consistency with paragraph number of IFRS 1, the
same is retained in Ind AS 101.



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