Brief on Indian Accounting Standard (Ind AS) 101

First-Time Adoption of Indian Accounting Standards

Note : This article covers a few important points related to Ind AS 101. Refer to this PDF to read the full details of this accounting standard : http://mca.gov. in/Ministry/pdf/IndAS101_2019.pdf

The objective of Ind AS 101 is to ensure that an entitys first Ind AS financial statements contain information that :

• Is transparent for users
• Provides suitable starting point for accounting
• Can be generated at a reasonable cost

Recognition and measurement

An entity shall, in its opening Ind AS Balance Sheet :

• Recognize all assets and liabilities whose recognition is required by Ind ASs
• Reclassify items in accordance with Ind ASs
• Apply Ind AS in measuring all recognized assets and liabilities

Para 12 of Ind AS 101 establishes two categories of exceptions to the principle that an entity opening Ind AS Balance Sheet shall comply with each Ind AS :

1. Paragraph 1417 and Appendix B prohibit retrospective application of some aspects
2. Paragraph CD grant exemptions from some requirements of other Ind ASs

As per Para 21 of Ind AS 101, an entitys first Ind AS financial statements shall include at least  three Balance Sheet, two Statements of profit and loss, two statements of cash flows and two Statements of changes in equity and related notes, including comparative information for all  statements presented.

Paragraph 1417 are summarized below :

Estimates : An entitys estimate in accordance with Ind AS should be consistent with estimate made as per previous standard.Para 15 describes that 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. An entity may need to make estimates in accordance with Ind ASs at the date of transition that were not required at that date under previous GAAP. Para 1416 apply to opening Ind AS Balance Sheet and to a comparative period presented in an entitys first Ind AS financial statements.

Appendix B

This appendix is an integral part of this Ind AS.

An entity shall apply the following exceptions :

• Derecognition of financial assets and liabilities : Derecognition requirement in Ind AS-109 shall apply prospectively for transactions occurring on or after the date of transition to  Ind ASs.
• Hedge Accounting : As per Ind AS 109, measure all derivatives at fair value and eliminate all deferred losses and gains in accordance with previous GAAP.
• Non-controlling interest : Requirement of Ind AS-110 shall apply prospectively from the date of transition to Ind ASs.
• Classification and measurement of financial assets : 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.
• Impairment of financial assets : 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.
• Embedded derivatives : A first-time adopter shall assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative on the basis of conditions that existed at the later of the date it first become a party to  the contract.
• Government Loans : A first-time adopter shall classify all government loans received as a financial liability or an equity instrument in accordance with Ind AS 32.

The above article is written by CA Chanchal Jain in full-time practice and could be reached at [email protected] or [email protected]

Disclaimer : The above article is meant for informational purpose only and does not purport to be advice or opinion, legal or otherwise, whatsoever. While due care has been taken during the compilation of this article to ensure that the information is accurate to the best of our knowledge and belief, the contents of such article do not substitute for professional advice that may be required. The individual expressly disclaims all and any liability to any person who has read this document or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this article.

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