When an entity following accounting standards (AS) as per iGAAP gets transitioned into Ind AS, there would be some challenges faced by the entity. The initial issue is to have a proper starting point for preparation of the accounts as per Ind AS. The entity that wants to adopt Ind AS, should prepare an opening balance sheet that is consistent with Ind ASs.
The objective of Ind AS 101 is to ensure that the first Ind AS financial statements and interim financial reports contain high quality information and is transparent for the users and comparable over all the periods that are presented.
The standard also provides guidance to prepare the opening balance sheet so as to get a suitable starting point for accounting as per Indian Accounting Standards (Ind ASs). In all of these, the objective is that the high quality information should be generated at a cost that does not exceed the benefits.
Overview of Ind AS 101
- 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.
Ind AS 101 applies to entities during its first Ind AS financial statements and also during each interim financial report under Ind AS 101.
- Ind AS 101 is applicable for the first time adoption of Ind AS only and does not apply to changes in accounting policies made by an entity that already applies Ind AS.
- Ind AS 101 is different from transition adjustment that is provided in each standard. When a new accounting standard is introduced, the standard provides as to how the issues relating to transitioning the standards from existing GAAP to
- Ind AS is mentioned in the respective standards. The transition adjustments will not be applicable to entities in India, as the entire set of 39 accounting standards are applicable with effect from the date on which it is set to be mandatorily applicable by the Ministry of Corporate Affairs.
- When an Ind AS is applicable, ipso facto it is applicable with effect from the date of inception of the entity and not from the date on which the standard becomes mandatorily applicable. In order to avoid the hardship caused to the entities
- while applying the same on a retrospective basis, every accounting standard contains a section known as ‘transition adjustments’ which specifies the way in which the entity can avail certain exceptions and exemptions from the rigors of implementing the standard on a retrospective basis.
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