IND AS 101

First-time Adoption of Indian Accounting

Standards

CA Jyoti Malkani
17.04.2023
Transition means

Shift
Existing GAAP Ind AS

In INDIA
Previous
AS
GAAP

Accounting
practice in Shift
Other than force before IFRS
INDIA adoption of
IFRS

Previous
GAAP
For Transition from Previous GAAP to Ind AS/
IFRS

Accordingly
transition
Change in Staff Format of needs
Accounting Training is FS will certain cost
System required change of
compliance
Transition in Financial Statements

Transition Needed
Ind AS 101
Balance Sheet Continued applied Transition is
needed only
for those
No Transition ledgers which
Needed No continue year
Profit & Loss
Not Continue Applicability of after year.
A/c
Ind AS 101 Hence
Transition of
No Transition B/s Items is
Needed No needed only
Cash Flows Not Continue Applicability of
Ind AS 101
Process of Transition – Balance Sheet

Particulars Treatment

Asset in AS but not in Ind AS Write off

Asset/ Liab in AS and in Ind AS but value is Adjustment

different

Asset/ Liab in AS and also in Ind AS but Re- Classification

classification is different

Liability in AS but not in Ind AS Write off

Asset / Liab not in As but in Ind AS Create

Study of Transitional Impact

Transition in B/s Ledger

Previous GAAP New GAAP
AS Ind AS

PAST FUTURE
Ledger

Retrospective Question Prospective

Transition arises??? Transition
Study of Transitional Impact

• Full retrospective transactions of all ledgers provide true and fair view of transition
• But full retrospective application is subject to the following limitation
o Time and cost consuming
o Speculative date
• Hence Ind AS 101 does not adopt full retrospective application
• This mixed approach is followed for smooth transition
Definitions

First IND AS Financial Statements

The first annual financial statements in which an entity adopts Indian Accounting Standards
(Ind-ASs), by an explicit and unreserved statement of compliance with Ind-ASs.
This means that compliance has to be with all IND – AS partial compliance is not enough to
make an entity Ind AS Compliant

First Time adoptor

An entity that presents its first Ind-AS financial statements

Opening IND AS Balance Sheet

An entity’s Balance Sheet at the date of transition to Ind-AS
Definitions

Date of Transition to IND AS

The beginning date of financial year on or after 1 April 2011 for which an entity presents full
comparative financial information under Ind-ASs in its first Ind-AS financial statements.
Eg: A ltd is required to adopt IND As from 1st April 2021 with comparatives of 1 year, ie: from
2020-21 What will be date of transition?
Answer: the beginning of the comparative period will be date of transition ie: 1st April 2020

First IND AS reporting period

The latest reporting period covered by an entity’s first IND AS financial statements
Eg: A limited has prepared financial statements as per IND AS from 1st April 2021
What will be the first IND AS reporting period
Answer – 1st Ind AS reporting period will be year ended 31.03.2022 ie: 1.4.2021 to 31.03.2022.
The fnancial statement for 1.4.2020 to 31.03.2021 will be comparative for the 1st ind as reporting
period
Definitions

Deemed Cost
An amount used as a surrogate for cost or depreciated cost at a given date.
Subsequent depreciation or amortization assumes that the entity had initially recognized the
asset or liability at the given date and that its cost was equal to the deemed cost.
This definition will be used in measurement, at the date of transition to IND AS of
▪ Investment in Subsidary, joint ventures and associates
▪ Property, plant and equipment, an investment in property, an intangible asset or a right of
use asset
▪ Assets acquired and liabilities assumed in business combination when the exemption
under IND AS 101 is availed.
Deemed Cost - Example

Transition on 01.04.2017
A limited Ind AS

Transition date is
01.04.2016
PPE (beginning of the
earliest period)
Cost 10,00,000 Deemed Cost under Ind
Depreciation (4,00,000) AS Rs. 6,00,000
WDV 6,00,000

Intangible Asset
Cost 10,00,000 Deemed Cost under Ind
Amortize (4,00,000) AS Rs. 6,00,000
WDV 6,00,000
Definitions

Surrogate cost means

Any cost other than WDV, it may be revalued, replacement cost etc

Previous GAAP
The basic accounting of a first time adoptor use for the statutory reporting purpose in India
immediately before adoption of Ind AS
Scope of Ind AS

First Ind AS FS

Applies
to
Each interim financial report for a part of the
period covered thereof
Ind AS

Does not Changes in Accounting policy made by an

applies entity that is already applied Ind AS
to (Applicable Ind AS 8)
Recognition and Measurement

• Opening Ind AS Balance Sheet

• This is the starting point. The entity will prepare and present an opening Ind AS balance
sheet at the date of transition to IND AS

01.04.2016 31.03.2017 31.03.2018

Start Point Accounts to be

Ind AS 101 to apply prepared
Recognition and Measurement

• Accounting Policies
• Entity uses the same accounting policies in its opening Ind AS balance sheet and through
all periods presented in its first Ind AS financial statements.

01.04.2016 31.03.2017 31.03.2018

Continue Continue
Adopted

Start Point Accounts to be

Ind AS 101 to apply prepared
Example
Situation AS (Pervious GAAP) IND AS
Reclassification PPE – Business, Rent Business – PPE
Rental – Investment in property
Reclassification Convertible debentures – Long term Equity – Liability Split
borrowing
Reclassification Redemption of preference share capital Redemption of PSC – Long term liability
– Equity
Measurement Debentures raised (FV) at Fair value Debentures raised – Amortized cost – Effective
date
Measurement Intangible Assets – Always recorded at IA ( Subsequently recorded at cost/revalued
costs amount)
Lease Classification In books of the lessee In books of lessee all lease are financial lease
Operating lease/ financial lease except low value item and lease upto 12months
Creation of an Asset Biological asset is not recorded Biological asset is recorded
Derivation Derivations are not to be recorded in AS Derivatives are recorded at FVTPL except
classifying as hedging instruments
Recognition and Measurement

• Accounting Policies
• These accounting policies shall comply with each Ind AS effective at the end of its first Ind
AS reporting period, subject to
• Mandatory exceptions
• Optional exemptions
Mandatory Exceptions

Exceptions to retrospective application of other Ind AS

• Estimates
• De-recognition of assets and liabilities
• Hedge Accounting
• Non-controlling Interests
• Classification and measurement of financial instruments
• Impairment of financial Assets
• Embedded Derivatives
• Government Loans
Optional Exceptions
An entity may elect to use 1 or more exemptions of the following
• Business Combinations
• Insurance Contracts
• Shared based payment transactions
• Deemed cost for PPE, intangible assets and right of use assets
• Cumulative translation difference
• Long term foreign currency monetary items
• Investment in subsidiaries , joint ventures and associates
• Compound financial instruments
• Fair value measurement of financial assets or financial liabilities
• Decommissioning liabilities includes property, plant and equipment
Optional Exceptions Contd….
• Designation of previously recognised financial instruments
• Extinguishing financial liabilities with equity instruments
• Severe Hyperinflation
• Leases
• Financial asset or intangible assets accounted for in accordance with Appendix D to Ind
AS 115, Service concession agreements
• Designation of contracts to buy or sell a non-financial item
• Striping costs in the production of surface mine
• Non- Current assets held for sale and discontinued operations
• Assets and liabilities of subsidiaries, associates, and joint ventures
• Revenue from Contract with customers
• Joint arrangements
Financial Assets and Liabilities

Previous GAAP New GAAP

AS Ind AS
On date of
Transition

• Classification
Retrospective is • Measurement Future
prohibited • Recognition accounting as
• Impairment per AS 109
• De-recognise

Now any valuation difference arising as on the date of transition, then it will be transferred to
Retained Earnings Ie: Transition date is treated as the transaction date
Hedge Accounting

Transition Date
Previous GAAP New GAAP
AS Ind AS

• Eliminate all deferred losses and gain arising on

derivatives that were reported in accordance
with previous GAAP

• Measure all derivatives at fair value

Retrospective is Future
prohibited • Only those hedge that continue to satisfy accounting as
conditions under Ind AS 109 per AS 109

• An entity shall not reflect in its opening Ind AS

b/s a hedge relation of a type that does not
qualify for hedge accounting under Ind AS 109
Non Controlling Interest (NCI)

Transition Date
Previous GAAP New GAAP
AS Ind AS

• TCI (P/L) attributable to owner of parent & to the NCI

even if the result in NCI have deficit balance

Retrospective • Accounting for changes in parent- ownership interest in

is prohibited subsidiary that do not result into loss of control

• Accounting for loss of control over a subsidiary &

Related requirements of Ind AS
Exception

If an entity re-state Business Combination Now, NCI has

business combination has optional exemption mandatory exemption.
from earlier date then to opt for Ind AS either So if business
above restatement shall on retrospective or combination chooses
also be made from date prospective basis retrospectively, then NCI
will also be
retrospectively
Embedded Derivation
Embedded Derivative would be hybrid security that features a derivative component integrated with a
non derivative security

Transition Date
Previous GAAP New GAAP
AS Ind AS

• Split embedded
derivation from host
Retrospective is contract if required
prohibited Future (Ind AS)
• Account such
embedded derivative
separately
Government Loan

Transition Date
Previous GAAP New GAAP
AS Ind AS

• Split the government loan into loan liability and

Retrospective government grant
is prohibited

Financial impact of 1st time adoption

All financial effect is adjusted in retained earnings
Presentation & Disclosure

• Comparative Information
• Ind AS does not require historical summaries to comply with the recognition and
measurement requirements of Ind AS.
• In any financial statements containing historical summaries or comparative information in
accordance with pervious GAAP, an entity shall
➢ Label the previous GAAP information prominently as not being prepared in
accordance with Ind AS, and
➢ Disclose the nature of the main adjustments that would make it comply with Ind AS.
An entity need not qualify those items.
Presentation & Disclosure

• Explanation of transition to Ind AS

• An entity shall explain how the transition from previous GAAP to Ind-ASs affected its
reported Balance Sheet, financial performance and cash flows.
• Reconciliations 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.
➢ significant differences between previous GAAP and Ind-AS in respect of its total
comprehensive income
• Sufficient detail to understand the adjustments to each line item
• Reconciliation to distinguish between the correction of errors identified during transition
from changes in accounting policies.
• Fair value as deemed cost and the amount of the adjustment
Presentation & Disclosure

• Explanation of transition to Ind AS Contd…

• Ind AS 36 disclosures for impairment during transition
• If an entity adopts the first time exemption option, to disclose the fact and the accounting
policy until such time that significant block of such assets is fully depreciated or
derecognized from the entity’s Balance Sheet.
• Interim financial reports to include reconciliation with equity and profit or loss under
previous GAAP
• Further information to comply with Ind AS 34
Carves

Previous GAAP

IFRS -1 Ind AS 101

Basis of Accounting followed Basis of Accounting followed in

before IFRS India before following the Ind AS

Carrying amount of PPE as deemed

cost at transition date

IFRS -1 Ind AS 101

At transition date PPE shall be Carrying amount or fair value at

accounted either using IAS -16 or transition date taken as deemed
at Fair value cost
Carves
Long Term Foreign currency
Monetary Item

IFRS -1 Ind AS 101

No Provision Transition reserve shall be off set

or continued

Service Concession Arrangement

IFRS -1 Ind AS 101

Accounting as per IFRIC -12

Either retrospectively or by using
(International Financial Reporting
Interpretation Committee)
pervious GAAP carrying amount
Mandatory Exemption - Estimates

Estimates required by
previous GAAP
YES No

YES Make estimate reflecting

Evidence of Error
condition at relevant date

No
YES
Consistent with Ind AS
Use previous estimates
No

Use previous estimates &

adjust to reflect Ind AS
Observation

1 Use Ind AS
Estimates required by
Use Previous Estimates
previous GAAP
Direct Transit
Consistent
with Ind AS

2 Use previous estimates

Estimates required by
Error in Estimate after adjusting error at
previous GAAP
transition date

3
No Estimates under Create estimates at
previous GAAP relevant date
Not Consistent
3 with Ind AS
Estimates required by Use estimates after
previous GAAP adjusting Ind AS
Business Combinations (BC)

Business Combinations

Prospective Retrospective

Transition Date If the entity restates one BC, then all

subsequent BC will also be restated

Analysis of Prospective Transaction

Cost of Investment in separate FS of parent company - Share of net assets in subsidiary at

transition date = Goodwill

Restatement is made as per holding companies choice

Asset and liabilities of subsidiary are directly included
Others

• Insurance Contract – All subsequent accounting is done as per Ind AS 104

• Share Based Payment Transaction
• Entity shall not consider options that already vested before transition to Ind AS.
However, if first time adoptor has already disclosed fair value then accounting may be
made using Ind AS 102
• For option vested after transition date the adjustment must be made for value
calculated using Ind AS 102 and value as per GAAP
Share Based Payment
Transaction

Vested before transition Vested after transition

Ignore Value using Ind AS XXX

Value Using GAAP XXX
Adjust in R&S XXX
Deemed Cost of PPE

➢ Revalued amount cannot be considered

➢ Entity can use transition date fair value as deemed cost
➢ This does not amount to change in accounting policy
➢ In stand alone FS each entity of group can follow different values as deemed cost
➢ But in CFS, all have to follow the same approach
Cumulative Transition Difference

Cumulative Transition Difference

OPTION 1 OPTION 2

Eliminate entire difference through

R&S Continue translation difference
during future periods and amortize

If the entity has not exercised option earlier then continuation of para 46/46A is not possible
Others

Fair Value of Financial A/L

Prospectively Retrospectively

Hyper Inflation

Prospective adjustment Retrospective adjustment

THANK YOU