Ind AS 101 - Opening BS adjustments

Two categories of adjustments – Mandatory & Optional

Two categories of adjustments to the principle that an entity’s opening Ind AS Balance Sheet shall comply with each Ind AS

a) Prohibit retrospective application of some aspects of other Ind ASs [Mandatory exceptions]

  1. derecognition of financial assets and financial liabilities
  2. hedge accounting
  3. non-controlling interests
  4. classification and measurement of financial assets
  5. impairment of financial assets
  6. embedded derivatives and
  7. government loans

b) Grant exemptions from some requirements of other Ind ASs [Optional exemptions]

  1. share-based payment transactions
  2. insurance contracts
  3. deemed cost
  4. leases
  5. cumulative translation differences
  6. investments in subsidiaries, joint ventures and associates
  7. assets and liabilities of subsidiaries, associates and joint ventures
  8. compound financial instruments
  9. designation of previously recognised financial instruments
  10. fair value measurement of financial assets or financial liabilities at initial recognition
  11. decommissioning liabilities included in the cost of property, plant and equipment
  12. financial assets or intangible assets accounted for in accordance with Appendix C to Ind AS 115 Service Concession Arrangements
  13. borrowing costs
  14. extinguishing financial liabilities with equity instruments
  15. severe hyperinflation
  16. joint arrangements
  17. stripping costs in the production phase of a surface mine
  18. designation of contracts to buy or sell a non-financial item
  19. revenue from contracts with customers and
  20. non-current assets held for sale and discontinued operations

 In its opening Ind AS Balance Sheet, an entity shall

  1. recognise all assets and liabilities whose recognition is required by Ind ASs
  2. derecognise items as assets or liabilities if Ind ASs do not permit such recognition
  3. reclassify items that it recognised as per previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity as per Ind ASs
  4. remeasure all recognised assets and liabilities as per Ind ASs

Possible Inclusions

  • Embedded derivatives not identified so far
  • All derivatives at fair value
  • Impairment loss allowance on financial guarantee contracts

Possible Exclusions

  • Deferred costs that do not meet the Ind AS definition of an asset.
  • Restructuring provisions where there is no legal or constructive obligation.
  • General provisions or reserves where there is no legal or constructive obligation.
  • Receivables for revenue where the risks and rewards of ownership have not been transferred to the buyer or the service has not been provided.
  • Deferred tax assets where it is not probable there will be sufficient profits in future periods to recover the asset.

Possible Reclassifications

  • Amounts classified as equity under the previous GAAP that would meet the definition of a liability in Ind AS.
  • Assets and liabilities shown net under previous GAAP that cannot be offset under Ind AS.
  • Assets and liabilities that are not classified into those amounts that are current and those that are non-current in accordance with Ind AS.
  • Investments that must be classified in accordance with Ind AS 109.

Possible differences

  • Deferred taxes in accordance with Ind AS 12.
  • Provisions in accordance with Ind AS 37.
  • Effect of business combinations.
  • Changes in accounting policies requiring retrospective adjustments.
  • Accounting errors requiring adjustment in earlier years.
  • Use of functional currency which is different than the recording currency.
  • Deferred Tax impact on consolidation.
  • Fair Value measurements.
  • PPE and intangible assets where the depreciation or amortisation period under previous GAAP does not comply with Ind AS.
  • Capitalisation of borrowing costs and exchange differences.
  • Intangible assets having indefinite useful life.
  • Financial assets and liabilities that are measured in accordance with the requirements of Ind AS 109.

Retained earnings

  • 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.
  • Those adjustments are recognised directly in retained earnings at the date of transition to Ind ASs.