Exposure Draft
Indian Accounting Standard (Ind AS) 101,
First-time Adoption of Indian Accounting Standards
(Last date for Comments: November 17, 2014)
Issued by
Accounting Standards Board
The Institute of Chartered Accountants of India
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Indian Accounting Standard (Ind AS) 101
First-time Adoption of Indian Accounting Standards
Following is the Exposure Draft of revised Indian Accounting Standard (Ind AS)
101, First-time Adoption of Indian Accounting Standards issued by the Accounting
Standards Board of The Institute of Chartered Accountants of India, for comments.
This Ind AS would replace the existing Ind AS 101, First-time Adoption of Indian
Accounting Standards. The Board invites comments on any specific aspect of the
Exposure Draft. Comments are most helpful if they indicate the specific paragraph
or group of paragraphs to which they relate, contain a clear rationale and, where
applicable, provide a suggestion for alternative wording.
How to comment
Comments should be submitted using one of the following methods:
1. Electronically: Visit at the following link
http://www.icai.org/comments/asb/
2. Email: comments can be sent to: commentsasb@icai.in
3. Postal: Secretary, Accounting Standards Board,
The Institute of Chartered Accountants of India,
ICAI Bhawan, Post Box No. 7100,
Indraprastha Marg, New Delhi 110 002
Further clarifications on this Exposure Draft may be sought by e-mail to
achin.poddar@icai.in
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Indian Accounting Standard (Ind AS) 101
First-time Adoption of Indian Accounting Standards
CONTENTS paragraph
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, joint ventures and
associates 31
Use of deemed cost for oil and gas assets 31A
Use of deemed cost for operations subject to rate regulation 31B
Use of deemed cost after severe hyperinflation 31C
Interim financial reports 32-33
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
1 Comparison with IFRS 1, First-time Adoption of International Financial
Reporting Standards
3
4
Exposure Draft
Ind AS 101
First-time Adoption of Indian Accounting Standards
(The Exposure Draft of the Indian Accounting Standard includes paragraphs set in
bold type and plain type, which have equal authority. Paragraphs in bold type
indicate the main principles. (This Exposure Draft of the Indian Accounting
Standard should be read in the context of its objective and the Preface to the
Statements of Accounting Standards1)
Objective
1 The objective of this 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.
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, 2013 and makes an explicit and
unreserved statement in those financial statements of compliance with Ind
ASs.
4 [Refer to Appendix 1]
4A [Refer to Appendix 1]
4B [Refer to Appendix 1]
5 This Ind AS does not apply to changes in accounting policies made by an
1
Attention is specifically drawn to paragraph 4.3 of the Preface, according to which accounting
standards are intended to apply only to items which are material
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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 1319 and Appendices BD.
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.
Example: Consistent application of latest version of Ind ASs
Background
The end of entity A's first Ind AS reporting period is 31 March 2017. Entity A
decides to present comparative information in those financial statements for one year
only (see paragraph 21). Therefore, its date of transition to Ind ASs is the beginning
of business on 1 April 2015 (or, equivalently, close of business on 31 March 2015).
Entity A presented financial statements in accordance with its previous GAAP
annually to 31 March each year up to, and including, 31 March 2016.
Application of requirements
Entity A is required to apply the Ind ASs effective for periods ending on 31 March
2017 in:
a) preparing and presenting its opening Ind AS Balance Sheet at 1 April 2015;
and
b) preparing and presenting its Balance Sheet for 31 March 2017 (including
comparative amounts for the year ended 31 March 2016), Statement of profit or loss,
Statement of changes in equity and Statement of cash flows for the year to 31 March
2017 (including comparative amounts for the year ended 31 March 2016) and
disclosures (including comparative information for the year ended 31 March 2016).
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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 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 BD.
10 Except as described in paragraphs 1319 and Appendices BD, 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 (or, if appropriate, another category
of equity) at the date of transition to Ind ASs.
12 This Ind AS 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 1417 and Appendix B prohibit retrospective application of
some aspects of other Ind ASs.
(b) Appendices CD grant exemptions from some requirements of other
Ind ASs.
Exceptions to the retrospective application of other Ind ASs
13 This Ind AS prohibits retrospective application of some aspects of other Ind
ASs. These exceptions are set out in paragraphs 1417 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
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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 2015 and new information on
15 July 2015 requires the revision of an estimate made in accordance with
previous GAAP at 31 March 2015. The entity shall not reflect that new
information in its opening Ind AS Balance Sheet (unless the estimates need
adjustment for any differences 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 2016.
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 1416 apply to the opening Ind AS Balance Sheet. They also
apply to a comparative period presented in an entity's first Ind AS financial
statements, in which case the references to the date of transition to Ind ASs
are replaced by references to the end of that comparative period.
Exemptions from other Ind ASs
18 An entity may elect to use one or more of the exemptions contained in
Appendices C-D. An entity shall not apply these exemptions by analogy to
other items.
19 [Deleted]
Presentation and disclosure
20 This Ind AS does not provide exemptions from the presentation and
disclosure requirements in other Ind ASs.
Comparative information
21 An entity's first Ind AS financial statements shall include at least three
Balance Sheet, two Statements of profit or loss, two Statements of cash flows
and two Statements of changes in equity and related notes, including
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comparative information for all statements presented.
Non-IndAS comparative information and historical summaries
22 Some entities present historical summaries of selected data for periods before
the first period for which they present full comparative information in
accordance with Ind ASs. This Ind AS does not require such summaries to
comply with the recognition and measurement requirements of Ind ASs.
Furthermore, some entities present comparative information in accordance
with previous GAAP as well as the comparative information required by Ind
AS 1. In any financial statements containing historical summaries or
comparative information in accordance with previous GAAP, an entity shall:
(a) label the previous GAAP information prominently as not being
prepared in accordance with Ind ASs; and
(b) disclose the nature of the main adjustments that would make it
comply with Ind ASs. An entity need not quantify those adjustments.
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.
23A [Refer to Appendix 1]
23B [Refer to Appendix 1]
Reconciliations
24 To comply with paragraph 23, an entity's first Ind AS financial statements
shall include:
(a) reconciliations of its equity reported in accordance with previous
GAAP to its equity in accordance with Ind ASs for both of the
following dates:
(i) the date of transition to Ind ASs; and
(ii) the end of the latest period presented in the entity's most
recent annual financial statements in accordance with previous
GAAP.
(b) a reconciliation to its total comprehensive income in accordance with
Ind ASs for the latest period in the entity's most recent annual
financial statements. The starting point for that reconciliation shall be
total comprehensive income in accordance with previous GAAP for
the same period or, if an entity did not report such a total, profit or
loss under previous GAAP.
(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
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had recognised those impairment losses or reversals in the period
beginning with the date of transition to Ind ASs.
25 The reconciliations required by paragraph 24(a) and (b) 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
reconciliations required by paragraph 24(a) and (b) shall distinguish the
correction of those errors from changes in accounting policies.
27 Ind AS 8 does not apply to the 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 reconciliations required by paragraph 24(a) and
(b).
27AA If an entity adopts the first time exemption option provided in accordance
with paragraph D7AA, the fact and the accounting policy shall be disclosed
by the entity until such time that those items of Property, plant and
equipment, investment properties or intangible assets, as the case may be, are
significantly depreciated, impaired or derecognised from the entity's Balance
Sheet.
28 If an entity did not present financial statements for previous periods, its first
Ind 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 as
a financial asset measured at fair value through profit or loss in accordance
with paragraph D19A. The entity shall disclose the fair value of financial
assets so designated at the date of designation and their classification and
carrying amount in the previous financial statements.
29A An entity is permitted to designate a previously recognised financial liability
as a financial liability at fair value through profit or loss in accordance with
paragraph D19. The entity shall disclose the fair value of financial liabilities
so designated at the date of designation and their classification and carrying
amount in the previous financial statements.
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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:
(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, joint ventures and associates
31 Similarly, if an entity uses a deemed cost in its opening Ind AS Balance
Sheet for an investment in a subsidiary, joint venture 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.
Use of deemed cost after severe hyperinflation
31C If an entity elects to measure assets and liabilities at fair value and to use that
fair value as the deemed cost in its opening Ind AS Balance Sheet because of
severe hyperinflation (see paragraphs D26D30), the entity's first Ind AS
financial statements shall disclose an explanation of how, and why, the entity
had, and then ceased to have, a functional currency that has both of the
following characteristics:
(a) a reliable general price index is not available to all entities with
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transactions and balances in the currency.
(b) exchangeability between the currency and a relatively stable foreign
currency does not exist.
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 covered by its first Ind
AS financial statements, the entity shall satisfy the following requirements in
addition to the requirements of Ind AS 34:
(a) Each such interim financial report shall, if the entity presented an
interim financial report for the comparable interim period of the
immediately preceding financial year, include:
(i) a reconciliation of its equity in accordance with previous GAAP
at the end of that comparable interim period to its equity under
Ind ASs at that date; and
(ii) a reconciliation to its total comprehensive income in accordance
with Ind ASs for that comparable interim period (current and
year to date). The starting point for that reconciliation shall be
total comprehensive income in accordance with previous GAAP
for that period or, if an entity did not report such a total, profit
or loss in accordance with previous GAAP.
(b) In addition to the reconciliations required by (a), an entity's first
interim financial report in accordance with Ind AS 34 for part of the
period covered by its first Ind AS financial statements shall include the
reconciliations described in paragraph 24(a) and (b) (supplemented by
the details required by paragraphs 25 and 26) or a cross-reference to
another published document that includes these reconciliations.
(c) If an entity changes its accounting policies or its use of the exemptions
contained in this Ind AS, it shall explain the changes in each such
interim financial report in accordance with paragraph 23 and update
the reconciliations required by (a) and (b).
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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Appendix A
Defined terms
This appendix is an integral part of this Ind AS.
date of transition The beginning of the earliest period for which an entity
to Ind ASs presents full comparative information under Ind ASs in
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 Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. (See Ind AS 113.)
first Ind AS Financi The first annual financial statements in which an entity
Statements adopts Ind ASs, by an explicit and unreserved
statement of compliance with Ind ASs.
first Ind AS reportin The latest reporting period covered by an entity's first
period Ind AS financial statements
first-time adopter An entity that presents its first Ind AS financial
statements.
Indian Accounting Ind ASs are Accounting Standards prescribed
Standards (Ind ASs) under Section 133 of the Companies Act, 2013.
opening Ind AS An entity's Balance Sheet at the date of transition to Ind
Balance Sheet ASs.
previous GAAP The basis of accounting that a first-time adopter used for
its statutory reporting requirement in India immediately
before adopting Ind AS's. For instance, companies
required to prepare their financial statements in
accordance with Section 133 of the Companies Act, 2013,
shall consider those financial statements as previous
GAAP financial statements.
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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 B4B6);
(c) non-controlling interests (paragraph B7);
(d) classification and measurement of financial assets (paragraphs B8-
B8C);
(e) impairment of financial assets (paragraphs B8D-B8G);
(f) embedded derivatives (paragraph B9); and
(g) government loans (paragraphs B10B12).
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 AS109 prospectively for transactions
occurring on or after the date of transition to Ind ASs. For example, 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 the date of transition to Ind ASs, 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 Despite paragraph B2, an entity may apply the derecognition requirements in
Ind AS 109 retrospectively from a date of the entity's choosing, provided that
the information needed to apply Ind AS 109 to financial assets and financial
liabilities derecognised as a result of past transactions was obtained at the
time of initially accounting for those transactions.
Hedge accounting
B4 As required by Ind AS 109, 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
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relationship of a type that does not qualify for hedge accounting in
accordance with Ind AS 109 (for example, many hedging relationships where
the hedging instrument is a stand-alone written option or a net written option;
or where the hedged item is a net position in a cash flow hedge for another
risk than foreign currency risk). However, if an entity designated a net
position as a hedged item in accordance with previous GAAP, it may
designate as a hedged item in accordance with Ind ASs an individual item
within that net position, or a net position if that meets the requirements in
paragraph 6.6.1 of Ind AS 109, 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 109, the entity shall apply paragraphs 6.5.6 and 6.5.7 of
Ind AS 109 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 110
prospectively from the date of transition to Ind ASs:
(a) the requirement in paragraph B94 that total comprehensive income is
attributed to the owners of the parent and to the non-controlling
interests even if this results in the non-controlling interests having a
deficit balance;
(b) the requirements in paragraphs 23 and B96 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 B97B99 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 retrospectively to
past business combinations, it shall also apply Ind AS 110 in accordance with
paragraph C1 of this Ind AS.
Classification and measurement of financial assets
B8 An entity shall assess whether a financial asset meets the conditions in
paragraph 4.1.2 or the conditions in paragraph 4.1.2A of Ind AS 109 on the
basis of the facts and circumstances that exist at the date of transition to Ind
ASs.
B8A If it is impracticable to assess a modified time value of money element in
accordance with paragraphs B4.1.9BB4.1.9D of Ind AS 109 on the basis of
the facts and circumstances that exist at the date of transition to Ind ASs, an
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entity shall assess the contractual cash flow characteristics of that financial
asset on the basis of the facts and circumstances that existed at the date of
transition to Ind ASs without taking into account the requirements related to
the modification of the time value of money element in paragraphs B4.1.9B
B4.1.9D of Ind AS 109. An entity shall disclose the carrying amount at the
reporting date of the financial assets whose contractual cash flow
characteristics have been assessed based on the facts and circumstances that
existed at the date of transition to Ind ASs without taking into account the
requirements related to the modification of the time value of money element
in paragraphs B4.1.9BB4.1.9D of Ind AS 109 until those financial assets are
derecognized.
B8B If it is impracticable to assess whether the fair value of a prepayment feature
is insignificant in accordance with paragraph B4.1.12(c) of Ind AS 109 on
the basis of the facts and circumstances that exist at the date of transition to
Ind-ASs, an entity shall assess the contractual cash flow characteristics of
that financial asset on the basis of the facts and circumstances that existed at
the date of transition to Ind-ASs without taking into account the exception for
prepayment features in paragraph B4.1.12 of Ind AS 109. An entity shall
disclose the carrying amount at the reporting date of the financial assets
whose contractual cash flow characteristics have been assessed based on the
facts and circumstances that existed at the date of transition to Ind ASs
without taking into account the exception for prepayment features in
paragraph B4.1.12 of Ind AS 109 until those financial assets are
derecognised.
B8C If it is impracticable (as defined in Ind AS 8) for an entity to apply
retrospectively the effective interest method in Ind AS 109, the fair value of
the financial asset or the financial liability at the date of transition to Ind ASs
shall be the new gross carrying amount of that financial asset or the new
amortised cost of that financial liability at the date of transition to Ind ASs.
Impairment of financial assets
B8D An entity shall apply the impairment requirements in Section 5.5 of Ind AS
109 retrospectively subject to paragraphs B8E, B8F and B8G of this Ind AS.
B8E At the date of transition to Ind ASs, an entity shall use reasonable and
supportable information that is available without undue cost or effort to
determine the credit risk at the date that financial instruments were initially
recognised (or for loan commitments and financial guarantee contracts the
date that the entity became a party to the irrevocable commitment in
accordance with paragraph 5.5.6 of Ind AS 109) and compare that to the
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credit risk at the date of transition to Ind ASs (also see paragraphs B8EA
B8EB of this Ind AS.
B8EA An entity should seek to approximate the credit risk on initial recognition by
considering all reasonable and supportable information that is available
without undue cost or effort. An entity is not required to undertake an
exhaustive search for information when determining, at the date of transition
to Ind ASs, whether there have been significant increases in credit risk since
initial recognition. If an entity is unable to make this determination without
undue cost or effort paragraph B8G of this Ind AS applies.
B8EB In order to determine the loss allowance on financial instruments initially
recognised (or loan commitments or financial guarantee contracts to which
the entity became a party to the contract) prior to the date of initial
application, both on transition and until the derecognition of those items, an
entity shall consider information that is relevant in determining or
approximating the credit risk at initial recognition. In order to determine or
approximate the initial credit risk, an entity may consider internal and
external information, including portfolio information, in accordance with
paragraphs B5.5.1B5.5.6 of Ind AS 109.
B8F When determining whether there has been a significant increase in credit risk
since initial recognition, an entity may apply:
(a) the requirements in paragraph 5.5.10 and B5.5.22B5.5.24 of Ind AS
109; and
(b) the rebuttable presumption in paragraph 5.5.11 of Ind AS 109 for
contractual payments that are more than 30 days past due if an entity
will apply the impairment requirements by identifying significant
increases in credit risk since initial recognition for those financial
instruments on the basis of past due information.
B8G If, at the date of transition to Ind ASs, determining whether there has been a
significant increase in credit risk since the initial recognition of a financial
instrument would require undue cost or effort, an entity shall recognise a loss
allowance at an amount equal to lifetime expected credit losses at each
reporting date until that financial instrument is derecognised (unless that
financial instrument is low credit risk at a reporting date, in which case
paragraph B8F(a) applies).
Embedded derivatives
B9 A first-time adopter shall assess whether an embedded derivative is required
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to be separated from the host contract and accounted for as a derivative on
the basis of the conditions that existed at the later of the date it first became a
party to the contract and the date a reassessment is required by paragraph
B4.3.11 of Ind AS 109.
Government loans
B10 A first-time adopter shall classify all government loans received as a
financial liability or an equity instrument in accordance with Ind AS 32
Financial Instruments: Presentation. Except as permitted by paragraph B11,
a first-time adopter shall apply the requirements in Ind AS 109 Financial
Instruments and Ind AS 20 Accounting for Government Grants and
Disclosure of Government Assistance prospectively to government loans
existing at the date of transition to Ind ASs and shall not recognise the
corresponding benefit of the government loan at a below-market rate of
interest as a government grant. Consequently, if a first-time adopter did not,
under its previous GAAP, recognise and measure a government loan at a
below-market rate of interest on a basis consistent with Ind AS requirements,
it shall use its previous GAAP carrying amount of the loan at the date of
transition to Ind ASs as the carrying amount of the loan in the opening Ind
AS Balance Sheet. An entity shall apply Ind AS 109 to the measurement of
such loans after the date of transition to Ind ASs.
B11 Despite paragraph B10, an entity may apply the requirements in Ind AS 109
and Ind AS 20 retrospectively to any government loan originated before the
date of transition to Ind ASs, provided that the information needed to do so
had been obtained at the time of initially accounting for that loan.
B12 The requirements and guidance in paragraphs B10 and B11 do not preclude
an entity from being able to use the exemptions described in paragraphs
D19D19C relating to the designation of previously recognised financial
instruments at fair value through profit or loss.
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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. This Appendix should only be applied to business
combinations within the scope of Ind AS 103 Business Combinations.
C1 A first-time adopter may elect not to apply Ind AS 103 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 110 from that same date.
For example, if a first-time adopter elects to restate a business combination
that occurred on 30 June 2010, it shall restate all business combinations that
occurred between 30 June 2010 and the date of transition to Ind ASs, and it
shall also apply Ind AS 110 from 30 June 2010.
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
(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
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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 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 earnings.2
(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
2
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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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 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) (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 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
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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 103 would not
permit, but were made in accordance with previous GAAP
because of adjustments to assets and liabilities between the date
of the business combination and the date of transition to Ind
ASs.
(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:
22
(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
acquisitionsof investments in associates and of interests in joint ventures.
Furthermore, the date selected for paragraph C1 applies equally for all such
acquisitions.
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Appendix D
Exemptions from other Ind ASs
This appendix is an integral part of thisInd 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 D5D8B);
(d) leases (paragraphs D9 and D9AA);
(e) [deleted]
(f) cumulative translation differences (paragraphs D12 and D13);
(g) investments in subsidiaries, joint ventures 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
(paragraphs D19D19C);
(k) fair value measurement of financial assets or financial liabilities at
initial recognition (paragraph D20);
(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 115 Service Concession
Arrangements(paragraph D22);
(n) borrowing costs (paragraph D23);
(o) [deleted];
(p) extinguishing financial liabilities with equity instruments (paragraph
D25);
(q) severe hyperinflation (paragraphs D26D30);
(r) joint arrangements (paragraph D31-D31AL);
(s) stripping costs in the production phase of a surface mine (paragraph
D32);
(t) designation of contracts to buy or sell a non-financial item (paragraph
D33);
(u) revenue from contracts with customers (paragraph D34 - D35); and
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(v) non-current assets held for sale and discontinued operations
(paragraph D35AA).
(w) non-current assets held for sale and discontinued operations
(paragraph D35AB).
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 (eg, 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 2629 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.
Insurance contracts
D4 An entity shall apply Ind AS 104 Insurance Contracts for annual periods
beginning on or after date of transition to Ind ASs. 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 full comparative
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.
25
Deemed cost
D5 An entity 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
(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.
D7AA Where there is no change in its functional currency on the date of transition
to Ind ASs, a first-time adopter to Ind ASs 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 to Ind ASs, measured as
per the previous GAAP and use that as its deemed cost as at the date of
transition after making necessary adjustments in accordance with paragraph
D21 and D21A, of this Ind AS. For this purpose, if the financial statements
are consolidated financial statements, the previous GAAP amount of the
subsidiary shall be that amount used in preparing and presenting consolidated
financial statements. Where a subsidiary was not consolidated under previous
GAAP, the amount required to be reported by the subsidiary as per previous
GAAP in its individual financial statements shall be the previous GAAP
amount. If an entity avails the option under this paragraph, no further
adjustments to the deemed cost of the property, plant and equipment so
determined in the opening balance sheet shall be made for transition
adjustments that might arise from the application of other Ind ASs. This
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."
26
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
privatization or initial public offering.
(a) If the measurement date is at or before the date of transition to Ind
ASs, the entity may use such event-driven fair value measurements as
deemed cost for Ind ASs at the date of that measurement.
(b) If the measurement date is after the date of transition to Ind ASs, but
during the period covered by the first Ind AS financial statements, the
event-driven fair value measurements may be used as deemed cost
when the event occurs. An entity shall recognise the resulting
adjustments directly in retained earnings (or if appropriate, another
category of equity) at the measurement date. At the date of transition
to Ind ASs, the entity shall either establish the deemed cost by
applying the criteria in paragraphs D5D7 or measure assets and
liabilities in accordance with the other requirements in this Ind AS.
D8A Under some GAAP's exploration and development costs for oil and gas
properties in the development or production phases are accounted for in cost
centers 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 date of transition
to Ind ASs in accordance with IndAS106 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
27
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 are governed by a framework for
establishing the prices that can be charged to customers for goods or services
and that framework is subject to oversight and/or approval by a rate regulator
(as defined in Ind AS 14 Regulatory Deferral Accounts).
Leases
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.
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.
D9AA When a lease includes both land and building elements, a first time adopter
may assess the classification of each element as finance or an operating lease
at the date of transition to Ind ASs on the basis of the facts and circumstances
existing as at that date. If there is any land lease newly classified as finance
lease then the first time adopter may recognise assets and liability at fair
value on that date; and any difference between those fair values is recognised
in retained earnings.
D10 [Deleted]
D11 [Deleted]
Cumulative translation differences
D12 Ind AS 21 requires an entity:
(a) to recognise some translation differences in other comprehensive
28
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
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.
Investments in subsidiaries, joint ventures and associates
D14 When an entity prepares separate financial statements, Ind AS 27 requires it
to account for its investments in subsidiaries, joint ventures and associates
either:
(a) at cost; or
(b) in accordance with Ind AS 109.
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
(b) deemed cost. The deemed cost of such an investment shall be its:
(i) fair value 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, joint venture 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
29
the parent acquired the subsidiary (this election is not available to a
subsidiary of an investment entity, as defined in Ind AS 110, that is
required to be measured at fair value through profit or loss); 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 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. Notwithstanding this
requirement, a non-investment entity parent shall not apply the exception to
consolidation that is used by any investment entity subsidiaries. Similarly, if
a parent becomes a first-time adopter for its separate financial statements
earlier or later than for its consolidated financial statements, it shall measure
its assets and liabilities at the same amounts in both financial statements,
except for consolidation adjustments.
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 Ind AS 109 permits a financial liability (provided it meets certain criteria) to
30
be designated as a financial liability at fair value through profit or loss.
Despite this requirement an entity is permitted to designate, at the date of
transition to Ind ASs, any financial liability as at fair value through profit or
loss provided the liability meets the criteria in paragraph 4.2.2 of Ind AS 109
at that date.
D19A An entity may designate a financial asset as measured at fair value through
profit or loss in accordance with paragraph 4.1.5 of Ind AS 109 on the basis
of the facts and circumstances that exist at the date of transition to Ind ASs.
D19B An entity may designate an investment in an equity instrument as at fair
value through other comprehensive income in accordance with paragraph
5.7.5 of Ind AS 109 on the basis of the facts and circumstances that exist at
the date of transition to Ind ASs.
D19C For a financial liability that is designated as a financial liability at fair value
through profit or loss, an entity shall determine whether the treatment in
paragraph 5.7.7 of Ind AS 109 would create an accounting mismatch in profit
or loss on the basis of the facts and circumstances that exist at the date of
transition to Ind ASs.
Fair value measurement of financial assets or financial liabilities at initial
recognition
D20 Despite the requirements of paragraphs 7 and 9 of this Ind AS, an entity may
apply the requirements in paragraph B5.1.2A (b) of Ind AS 109 prospectively
to transactions entered into on or after the 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, 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
31
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 centers 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.
Financial assets or intangible assets accounted for in accordance with Appendix
C to Ind AS 115
D22 A first-time adopter may apply the following provisions while applying the
Appendix C to Ind AS 115:
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
to Ind ASs, it shall:
(a) recognise financial assets and intangible assets that existed at the
date of transition to Ind ASs;
(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.
32
Borrowing costs
D23 [Refer to Appendix 1]
D24 [Deleted]
Extinguishing financial liabilities with equity instruments
D25 A first-time adopter may apply the Appendix E of Ind AS 109 Extinguishing
Financial Liabilities with Equity Instruments from the date of transition to
Ind ASs.
Severe hyperinflation
D26 If an entity has a functional currency that was, or is, the currency of a
hyperinflationary economy, it shall determine whether it was subject to
severe hyperinflation before the date of transition to Ind ASs. This applies to
entities that are adopting Ind ASs for the first time, as well as entities that
have previously applied Ind ASs.
D27 The currency of a hyperinflationary economy is subject to severe
hyperinflation if it has both of the following characteristics:
(a) a reliable general price index is not available to all entities with
transactions and balances in the currency.
(b) exchangeability between the currency and a relatively stable foreign
currency does not exist.
D28 The functional currency of an entity ceases to be subject to severe
hyperinflation on the functional currency normalisation date. That is the date
when the functional currency no longer has either, or both, of the
characteristics in paragraph D27, or when there is a change in the entity's
functional currency to a currency that is not subject to severe hyperinflation.
D29 When an entity's date of transition to Ind ASs is on, or after, the functional
currency normalisation date, the entity may elect to measure all assets and
liabilities held before the functional currency normalisation date at fair value
on the date of transition to Ind ASs. The entity may use that fair value as the
deemed cost of those assets and liabilities in the opening Ind AS Balance
Sheet.
D30 When the functional currency normalisation date falls within a 12-month
comparative period, the comparative period may be less than 12 months,
provided that a complete set of financial statements (as required by paragraph
10 of Ind AS 1) is provided for that shorter period.
Joint arrangements
D31 [Deleted]
Joint ventures - transition from proportionate consolidation to the equity
method
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D31AA When changing from proportionate consolidation to the equity method, an
entity shall recognise its investment in the joint venture at transition date
to Ind ASs. That initial investment shall be measured as the aggregate of
the carrying amounts of the assets and liabilities that the entity had
previously proportionately consolidated, including any goodwill arising
from acquisition. If the goodwill previously belonged to a larger cash-
generating unit, or to a group of cash-generating units, the entity shall
allocate goodwill to the joint venture on the basis of the relative carrying
amounts of the joint venture and the cash-generating unit or group of cash-
generating units to which it belonged.
D31AB The balance of the investment in joint venture at the date of transition to Ind
ASs, determined in accordance with paragraph D31AA above is regarded
as the deemed cost of the investment at initial recognition.
D31AC A first-time adopter shall test investment in joint venture for impairment
in accordance with Ind AS 36 at the date of transition to Ind ASs,
regardless of whether there is any indication that the investment may be
impaired. Any resulting impairment shall be recognised as an adjustment
to retained earnings at the date of transition to Ind ASs. The initial
recognition exception in paragraphs 15 and 24 of Ind AS 12 Income Taxes
does not apply when the entity recognises an investment in a joint venture
resulting from applying the transition requirements for joint ventures that
had previously been proportionately consolidated.
D31AD If aggregating all previously proportionately consolidated assets and
liabilities results in negative net assets, an entity shall assess whether it has
legal or constructive obligations in relation to the negative net assets and,
if so, the entity shall recognise the corresponding liability. If the entity
concludes that it does not have legal or constructive obligations in relation
to the negative net assets, it shall not recognise the corresponding liability
but it shall adjust retained earnings at the date of transition to Ind ASs.
The entity shall disclose this fact, along with its cumulative unrecognised
share of losses of its joint ventures at the date of transition to Ind ASs.
D31AE An entity shall disclose a breakdown of the assets and liabilities that have
been aggregated into the single line investment balance at the date of
transition to Ind ASs. That disclosure shall be prepared in an aggregated
manner for all joint ventures at the date of transition to Ind ASs.
D31AF After initial recognition at the date of transition to Ind ASs, an entity shall
account for its investment in the joint venture using the equity method in
accordance with Ind AS 28.
Joint operations--transition from the equity method to accounting for assets
and liabilities
D31AG When changing from the equity method to accounting for assets and
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liabilities in respect of its interest in a joint operation, an entity shall, at the
date of transition to Ind ASs, derecognise the investment that was
previously accounted for using the equity method and any other items that
formed part of the entity's net investment in the arrangement in
accordance with paragraph 38 of Ind AS 28 and recognise its share of each
of the assets and the liabilities in respect of its interest in the joint
operation, including any goodwill that might have formed part of the
carrying amount of the investment.
D31AH An entity shall determine its interest in the assets and liabilities relating to
the joint operation on the basis of its rights and obligations in a specified
proportion in accordance with the contractual arrangement. An entity
measures the initial carrying amounts of the assets and liabilities by
disaggregating them from the carrying amount of the investment at the
date of transition to Ind ASs on the basis of the information used by the
entity in applying the equity method.
D31AI Any difference arising from the investment previously accounted for using
the equity method together with any other items that formed part of the
entity's net investment in the arrangement in accordance with paragraph
38 of Ind AS 28, and the net amount of the assets and liabilities, including
any goodwill, recognised shall be:
a. offset against any goodwill relating to the investment with any
remaining difference adjusted against retained earnings at the date of
transition to Ind ASs, if the net amount of the assets and liabilities,
including any goodwill, recognised is higher than the investment
(and any other items that formed part of the entity's net investment)
derecognised.
b. adjusted against retained earnings at the date of transition to Ind
ASs, if the net amount of the assets and liabilities, including any
goodwill, recognised is lower than the investment (and any other
items that formed part of the entity's net investment) derecognised.
D31AJ An entity changing from the equity method to accounting for assets and
liabilities shall provide a reconciliation between the investment
derecognised, and the assets and liabilities recognised, together with any
remaining difference adjusted against retained earnings, at the date of
transition to Ind ASs.
D31AK The initial recognition exception in paragraphs 15 and 24 of Ind AS 12
does not apply when the entity recognises assets and liabilities relating to
its interest in a joint operation.
Transition provisions in an entity's separate financial statements
D31AL An entity that, in accordance with paragraph 10 of Ind AS 27, was
previously accounting in its separate financial statements for its interest in
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a joint operation as an investment at cost or in accordance with Ind AS
109 shall:
a. derecognise the investment and recognise the assets and the liabilities
in respect of its interest in the joint operation at the amounts
determined in accordance with paragraphs D31AG D31AI.
b. provide a reconciliation between the investment derecognised, and
the assets and liabilities recognised, together with any remaining
difference adjusted in retained earnings, at the date of transition to Ind
ASs.
Stripping costs in the production phase of a surface mine
D32 A first-time adopter may apply the Appendix B of Ind AS 16 Stripping Costs
in the Production Phase of a Surface Mine from the date of transition to Ind
ASs. As at transition date to Ind ASs, any previously recognised asset
balance that resulted from stripping activity undertaken during the production
phase (`predecessor stripping asset') shall be reclassified as a part of an
existing asset to which the stripping activity related, to the extent that there
remains an identifiable component of the ore body with which the
predecessor stripping asset can be associated. Such balances shall be
depreciated or amortised over the remaining expected useful life of the
identified component of the ore body to which each predecessor stripping
asset balance relates. If there is no identifiable component of the ore body to
which that predecessor stripping asset relates, it shall be recognised in
opening retained earnings at the transition date to Ind ASs.
Designation of contracts to buy or sell a non-financial item
D33 Ind AS 109 permits some contracts to buy or sell a non-financial item to be
designated at inception as measured at fair value through profit or loss (see
paragraph 2.5 of Ind AS 109). Despite this requirement an entity is permitted
to designate, at the date of transition to Ind ASs, contracts that already exist
on that date as measured at fair value through profit or loss but only if they
meet the requirements of paragraph 2.5 of Ind AS109 at that date and the
entity designates all similar contracts.
Revenue from contracts with customers
D34 A first-time adopter may use one or more of the following practical
expedients when applying Ind AS 115 retrospectively:
(a) for completed contracts, an entity need not restate contracts that begin
and end within the same annual reporting period;
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(b) for completed contracts that have variable consideration, an entity may
use the transaction price at the date the contract was completed rather
than estimating variable consideration amounts in the comparative
reporting periods; and
(c) for all reporting periods presented before the beginning of the first Ind
AS reporting period, an entity need not disclose the amount of the
transaction price allocated to the remaining performance obligations
and an explanation of when the entity expects to recognise that amount
as revenue.
D34AAFor any of the practical expedients in paragraph D34 that an entity uses, the
entity shall apply that expedient consistently to all contracts within all
reporting periods presented. In addition, the entity shall disclose all of the
following information:
(a) the expedients that have been used; and
(b) to the extent reasonably possible, a qualitative assessment of the
estimated effect of applying each of those expedients.
D35 A first-time adopter is not required to restate contracts that were completed
before the earliest period presented. A completed contract is a contract for
which the entity has transferred all of the goods or services identified in
accordance with previous GAAP.
Non-current assets held for sale and discontinued operations
D35AAInd AS 105 requires non-current assets (or disposal groups) that meet the
criteria to be classified as held for sale, non-current assets (or disposal
groups) that are held for distribution to owners and operations that meet the
criteria to be classified as discontinued and carried at lower of its carrying
amount and fair value less cost to sell on the initial date of such
identification. A first time adopter can:
(a) measure such assets or operations at the lower of carrying value and
fair value less cost to sell at the date of transition to Ind ASs in
accordance with Ind AS 105; and
(b) recognise directly in retained earnings any difference between that
amount and the carrying amount of those assets at the date of transition
to Ind ASs determined under the entity's previous GAAP.
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Appendix E
Short-term exemptions from Ind ASs
[Refer to Appendix 1]
38
Appendix 1
Major differences between Indian Accounting Standard (Ind AS) 101
First-time Adoption of Indian Accounting Standards and IFRS 1
Note: This Appendix is not a part of the Ind AS 101, First-time Adoption of
Indian Accounting Standards. The purpose of this Appendix is only to
highlight major 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, 2013
whereas IFRS 1 provides various examples of first IFRS financial statements.
2. Paragraph 4, 4A, 4B, 23A and 23B of IFRS 1 provide various examples of
instances when an entity does not apply this IFRS. Ind AS 101 does not
provide the same. In order to maintain consistency with paragraph numbers of
IFRS 1, the paragraph number is retained in Ind AS 101.
3. IFRS 1 defines previous GAAP as the basis of accounting that a first-time
adopter used immediately before adopting IFRS. However, Ind AS 101 defines
previous GAAP as the basis of accounting that a first-time adopter used for its
reporting requirement in India immediately before adopting Ind AS.
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 ASs.
4. Under IFRS 1, para C4(c) requires, 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 asset or liability
under Ind ASs. The first-time adopter shall account for the resulting change in
the retained earnings as at the transition date except in certain specific instances
where it requires adjustment in the goodwill. In such specific instances where
IFRS 1 allows adjustment in the goodwill, under Ind AS 101 it can be adjusted
with the Capital reserve to the extent such adjustment amount does not exceed
the balance available in Capital reserve.
5. Certain IFRS 1 exceptions to the retrospective application of other Ind ASs
refer to transitional provisions of other IFRSs. However Ind ASs does not
provide transitional provisions, accordingly transitional provisions in other
IFRSs have been incorporated in the paragraphs B8A, B8B, B8D, B8E, B8EA
and B8EB of Ind AS 101.
6. Certain exemptions in Appendix D of IFRS 1 refer to transitional provisions of
other IFRSs. However Ind ASs do not provide transitional provisions,
accordingly wherever considered an appropriate transitional provision in other
IFRSs has been incorporated in the respective exemptions in Appendix D of
Ind AS 101. The following paragraphs in IFRS 1 provide the transitional
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provisions of other IFRSs which are included in Ind AS 101:
(i) Paragraph D4 includes the transitional provisions of IFRS 4 Insurance
Contracts;
(ii) Paragraph D9 includes the transitional provisions of IFRIC 4
Determining whether an Arrangement contains a Lease;
(iii) Paragraph D22 includes the transitional provisions of IFRIC 12 Service
Concession Arrangements;
(iv) Paragraph D25 includes the transitional provisions of IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments;
(v) Paragraph D31 includes the transitional provisions of IFRS 11 Joint
Arrangements;
(vi) Paragraph D32 includes the transitional provisions of IFRIC 20 Stripping
Costs in the Production Phase of a Surface Mine; and
(vii) Paragraph D34 and D35 includes the transitional provisions of IFRS 15
Revenue from contracts customer.
7. 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 to Ind ASs. IFRS 1
provides for various dates from which a standard could have been
implemented. For example,
Paragraph D2 of IFRS 1 provides that an entity is encouraged, but not
required, to apply IFRS 2 Share-based Payment to equity instruments
that were granted on or before 7 November 2002 or to instruments that
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 borrowing cost exemptions not relevant for India:
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 to Ind ASs. However, this was considered as not
relevant in Indian situation as 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.
(c) Inclusion/modification of existing exemptions to make it relevant for
India. For example,
1. Paragraph D7AA has been added to provide for transitional relief
from the retrospective application of Ind AS 16: Property, Plant and
Equipment. Paragraph D7AA, provides an entity option to use
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carrying values of all such assets as on the date of transition to Ind
ASs, in accordance with previous GAAP as an acceptable starting
point under Ind AS. Paragraph 27AA 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 D7AA,
the fact and the accounting policy shall be disclosed by the entity
until such time that those items of property, plant and equipment,
investment properties or intangible assets, as the case maybe, are
significantly depreciated, impaired or derecognised from the entity's
Balance Sheet.
2. Paragraph D9AA has been added to provide for transitional relief
while applying Ind AS 17: Leases. D9AA provides an entity to use
the transition date facts and circumstances for lease arrangements
which includes both land and building elements to assess the
classification of each element as finance or an operating lease at the
transition date to Ind ASs. Also, if there is any land lease newly
classified as finance lease then the first time adopter may recognise
assets and liability at fair value on that date; any difference between
those fair values is recognised in retained earnings.
3. Paragraph D35AA has been added to provide for transitional relief
while applying Ind AS 105 - Non-current Assets Held for Sale and
Discontinued Operations. Paragraph D35AA 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.
8. Appendix E of IFRS 1 on `Short-term exemptions from IFRSs', however Ind
AS 101 does not provide the above said short-term exemption. In order to
maintain consistency with Appendix numbers of IFRS 1, the Appendix E is
retained in Ind AS 101.
9. IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with
Customers are effective from annual period beginning on or after January 1,
2018 and January 1, 2017, respectively. As the above said standards are not yet
effective consequential amendments due to these standards have not been
incorporated in current version of IFRS 1. However, corresponding Ind AS 109
Financial Instruments and Ind AS 115 Revenue from Contracts with Customer
have been issued with consequential amendments in other IFRS including IFRS
1. Accordingly, there consequential amendments Ind AS 109 and Ind AS 115
have been incorporated in Ind AS 101.
10. Different terminology is used in Ind AS 101, 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'.
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