This is 2nd part of IND AS 101 PPT. I already shared Part 1 few days ago. In Part 1 full map of IND 101 was there while in Part 2 the portion of Exemptions & Prohibitions on retrospective applications of some aspects of IND Ass has been summarised. This is most useful for the quick view of practical applicability of IND AS 101. Thanks!! Chitranshu Rahul Srivastava CA, IFRS

1. Part 2
Presented by
Chitranshu Rahul Srivastava
ACA, IFRS
AKGVG & Associates
Chartered Accountants
Mumbai
AKGVG & Associates

2. These prohibitions are described in Appendix-B as mentioned below.
(a) De-recognition of financial assets and financial liabilities Paragraphs - B2 & B3
(b) Hedge accounting Paragraphs - B4 - B6
(c) Non-controlling interests Paragraphs - B7
(d) Classification and measurement of financial assets Paragraphs - B8 - B8C
(e) Impairment of financial assets Paragraphs - B8D - B8G
(f) Embedded derivatives and Paragraphs - B9
(g) Government loans Paragraphs - B10 – B12
AKGVG & Associates

3. * An entity may choose the date for retrospective de-recognition of financial
assets/liabilities which is in “IND AS 109 Financial Instruments”.
provided that the information needed as a result of past transactions was obtained at
the time of initially accounting for those transactions.
* Transaction occurring after the transition date, the de-recognition in IND AS 109
would apply prospectively.
* At the date of transition, entity shall measure all the derivatives at fair value and
eliminate all deferred gain/loss on derivatives that were reported under previous
GAAP.
* Any hedge relationship which is not qualify for hedge accounting in accordance with
the IND AS 109 shall not be reflect on opening IND AS Balance Sheet.
AKGVG & Associates

4. Below mentioned Requirements of “IND AS 110 Consolidated Financial Statements” apply
prospectively from the date of transition.
(a) 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 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 for accounting for a loss of control over a subsidiary, and the related
requirements under “IND AS 105 Non-current Assets Held for Sale and Discontinued
Operations.”
AKGVG & Associates

5. * An entity shall assess whether a financial asset will be measured at amortized cost
or Fair value under “IND AS 109 Financial Instruments” on the basis of the facts and
circumstances that exist at the date of transition to IND ASs.
* If it is impracticable to assess
a modified time value of money element in accordance with IND AS 109
Or
whether the fair value of a prepayment feature is insignificant in accordance with
INDAS 109
Then the 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-AS without taking into account the exception for requirements related
to the modification of the time value of money element or prepayment features in IND AS
109.
And disclose the carrying amount of such financial assets.
* If it is impracticable 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 AS shall be the new gross carrying amount of that
financial asset or the new amortized cost of that financial liability at the date of
transition to IND ASs. AKGVG & Associates

6. An entity shall apply the impairment requirements in “IND AS 109 Financial Instruments”
retrospectively only when at the date of transition, reasonable and supportable information is
available without undue cost or effort to determine the credit risk at the date that financial
instruments were initially recognized and compare that to the credit risk at the date of transition
to IND ASs.
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 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 “IND AS 109 Financial Instruments”.
AKGVG & Associates

7. * An entity may apply the requirements in “IND AS 109 Financial Instruments” and
“IND AS 20 Accounting for Government Grants and Disclosure of Government Assistance”
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.
* A first-time adopter shall classify all government loans received as financial liability or
an equity instrument in accordance with “IND AS 32 Financial Instruments:
Presentation” except as described in above Para, 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 recognize 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,
recognize 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.
AKGVG & Associates

8. Exemptions for business combinations
As on IND AS transition date, there are some exemptions for IND AS 103 Business
Combination. Detail in Appendix C.
Exemptions from other IND-ASs
An entity may elect to use one or more of the exemptions which is available in INS AS 101.
Listing of topics in which such exemptions are available is as below :-
(a) Share-based payment transactions
(b) Insurance contracts
(c) Deemed cost
(d) Leases
(e) Cumulative translation differences
(f) Investments in subsidiaries, joint ventures and associates
(g) Assets and liabilities of subsidiaries, associates and joint ventures
(h) Compound financial instruments
AKGVG & Associates

9. (i) Designation of previously recognized financial instruments
(j) Fair value measurement of financial assets or financial liabilities at initial
….. recognition
(k) Decommissioning liabilities included in the cost of property, plant and
equipment
(l) Financial assets or intangible assets accounted for in accordance with
Appendix C to IND AS 115 Service Concession Arrangements
(m) Borrowing costs
(n) Extinguishing financial liabilities with equity instruments
(o) Severe hyperinflation
(p) Joint arrangements
(q) Stripping costs in the production phase of a surface mine
(r) Designation of contracts to buy or sell a non-financial item
(s) Revenue from contracts with customers ; AND
(t) Non-current assets held for sale and discontinued operations
Note :- An entity shall not apply these exemptions by analogy to other items.
AKGVG & Associates

10. * A first-time adopter may elect not to apply IND AS 103 retrospectively to past
business combinations occurred before the date of transition.
* However if opt to apply IND AS 103 then IND AS 110 also need to comply and
whatever the date has been choose the IND AS 103 would be applicable in all the
business combinations occurred after that date.
* For Fair Value adjustment & Goodwill, entity need not the comply with “IND AS 21
The Effects of Changes in Foreign Exchange Rates” retrospectively.
And in such case treat them as assets & liabilities of the entity rather then of the
acquiree.
* Entity has the option to apply IND AS 21 retrospectively either for all the business
combinations or from the date onwards where entity opt for IND AS 103
retrospectively.
* If entity opt for not to apply IND AS 103 retrospectively then
# All the classification should be same as of previous GAAP.
# Not to recognize those assets & liabilities which are derecognized
in accordance with the previous GAAP
# Not recognize those assets & liabilities which are not qualify to recognize
as per IND AS in the stand alone balance sheet of acquiree.
* All the changes would be routed through retained earnings account.
AKGVG & Associates

11. * Immediately after the business combinations, The carrying amount as per the
previous GAAP for the assets / liabilities would be deemed cost accordance with
the IND AS at that date.
* However if any assets / liabilities was not recognized in the previous GAAP, it
doesn't mean that deemed cost is Zero in opening IND AS Balance Sheet. In such case
value of these assets & liabilities need to recognize & measure for its CFS on
the basis that IND AS would require in the balance sheet of acquiree.
* Any Intangible assets which are recognized in accordance with the previous
GAAP but not qualify to recognize as per “IND AS 38 Intangible Assets” then need
to reclassify in Goodwill or Capital Reserve by increasing or decreasing the same.
* And in case where Intangible assets need to recognize in accordance with the
IND AS 38 but was not recognized in accordance with the previous GAAP the adjustment
require through goodwill or capital reserve by decreasing or increasing the same.
* Whether there is any indication or not, but Goodwill need to test for impairment as
per IND AS 36 as on the date of transition on the basis of the condition existed on the
date of transition.
* No other adjustment should be made in goodwill / capital reserve except the
explained above i.e. intangible assets and impairment.
* The exemption for past business combination also applies to past acquisitions of
investments in associates, interests in joint ventures and interests in joint
operations, as defined in IND AS 103
AKGVG & Associates

12. For Equity Instruments
* Vested before the date of transition then it is optional to apply IND AS 102 Shared
Based Payments.
* However if opted for applying IND AS 102 entity has disclosed publicly the fair
value of those equity instruments, determined at the measurement date, as defined in
IND AS 102.
* 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.
For Liabilities arising from Share based payment transaction
* transactions which were settled before transition date, need not to apply IND AS
102.
AKGVG & Associates

13. * Application of “IND AS 104 Insurance Contract” for the period before transitions
date is not mandatory however encouraged.
* If Entity choose to apply for the period before transition date then need to
disclose the fact.
* Disclosure of information about claims development that occurred earlier than
five years before the end of the first IND AS financial year is not require.
* If it is impracticable to prepare information about Claim Development that
occurred the before the transition date then disclose the fact.
* Changes in accounting policy is permitted.
* Reclassification of some or all financial assets as ‘ at fair value through profit or
Loss’ is only permitted when changes in accounting policy has been done when
first time apply IND AS 104.
* In case of subsequent accounting policy changes, reclassification of financial
assets is again permitted but only when such changes were made on account of more
relevancy and more reliability of financial statements.
AKGVG & Associates

14. * An entity may measure the item of “IND AS 16 PPE”, “IND AS 40 Investment property” &
“IND AS 38 intangible assets” either at Fair Value or at carrying value of previous GAAP as
deemed cost at the date of transition.
* If revaluation has been done in previous GAAP numbers then use these carrying
amounts only when it is broadly comparable to fair value or cost or depreciated cost in
accordance with IND ASs, adjusted to reflect, for example, changes in a general or
specific price index.
* Where there is no change in functional currency on the date of transition carrying value of
the PPE, Investment property, or intangible assets would be consider only after
adjustment as per IND AS regarding “Decommissioning liabilities included in the cost of property,
plant and equipment.
* Apply “IND AS17 Leases” to determine whether an arrangement existing on the date of
transition contain a lease.
* 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.
* If there is any land lease newly classified as finance lease then the first time adopter
may recognize assets and liability at fair value on that date; and any difference between
those fair values is recognized in retained earnings.
AKGVG & Associates

15. * First Time Adopter need not to comply with the below two requirement of the “IND AS
21 The Effects of Changes in Foreign Exchange Rates” :-
(a) to recognize some translation differences in other comprehensive 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.
* Entity may continue the policy for accounting of exchange difference in long term
foreign currency monetary item as per the previous GAAP.
* “IND AS 27 Separate Financial Statements” require to account for its investment in
subsidiary, JV or associates at cost or in accordance with the IND AS 109.
* However IND AS 101 provide options for :-
Either at COST i.e. IND AS 27
or at Fair Value on transition Date
or at Previous GAAP carrying amount
AKGVG & Associates
i.e. Deemed
Cost

16. * If a subsidiary becomes a first-time adopter later than its parent, the subsidiary
shall measure its assets & liabilities at either
# Carrying amount that would be included in its parent CFS (but not
consider adjustments for CFS or for business combination)
# carrying amount in accordance with IND AS 101 considering any
exemptions in IND AS 101 or any change in accounting policies.
* If an entity becomes a first-time adopter later than its subsidiary the entity shall,
in its CFS measure the assets and liabilities at carrying amount in FS of
subsidiary. Obviously adjustment for CFS and/or business combination would be
done on this carrying amount.
* First time adopter need not separate the compound financial instruments into
two portion of equity (i.e. retained earning & original equity) if there is no liability
component.
However CFI need to separate into Equity portion & Liability portion.
AKGVG & Associates

17. IND AS 109 permit to designate a
* Financial liability as measured at fair value thru P/L .
* Financial Assets as measured at fair value thru P/L .
* Investment in an equity instrument at fair value thru comprehensive income.
on the basis of the facts and circumstances that exist at the date of transition to
IND ASs.
* The best evidence for Fair value measurement is the transaction price of financial
instruments at initial recognition.
* If entity determine another fair value then it should be supported by proper
evidence.
* Difference between fair value at initial recognition and transaction price need to
recognize in gain or loss. AKGVG & Associates

18. In respect of liabilities occurred before transition date, the First time adopter need not to comply with
the requirement of “Appendix A to IND AS 16 Changes in Existing Decommissioning, Restoration and
Similar Liabilities” which require 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.
* “IND AS 8 Accounting Policies, Changes in Accounting Estimates and Errors” require changes in
accounting policies retrospectively except amortization of intangible assets from the service
concession arrangements relating to toll road for the period before the first IND AS
Financial reporting.
* However if it is impracticable to apply changes in accounting policies retrospectively then :-
# Recognize the financial assets & Intangible assets at carrying amount of
previous GAAP.
# And test financial assets & intangible assets for impairment.
* There are two aspect to retrospective determination 1st is reclassification & 2nd is re-
measurement.
It is always not an issue in case of re-classification but in case of re-measurement if not
practicable then leave it. However fact should be disclose.AKGVG & Associates

19. 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.
If an entity has a functional currency that was, or is, the currency of 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.
A first-time adopter shall test investment in joint venture for impairment in accordance with
“IND AS 36 Impairment of Assets” 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
recognized as an adjustment to retained earnings at the date of transition to IND ASs.
AKGVG & Associates

20. * A first-time adopter may apply the Appendix B of “IND AS 16 PPE” Stripping
Costs in the Production Phase of a Surface Mine from the date of transition to IND AS.
* As at transition date to IND AS, any stripping assets 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.
* Such balances shall be depreciated or amortized over the remaining expected
useful life of the identified component of the ore body to which each predecessor
stripping asset balance relates.
* If no identifiable component of the ore body to which that predecessor stripping
asset relates, it shall be recognized in opening retained earnings at the transition
date to IND ASs.
AKGVG & Associates

21. * 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.
* Despite this requirement an entity is permitted to designate contracts that already
exist on transition date as measured at fair value through profit or loss.
* A first-time adopter may use one or more of the following practical expedients
when applying “IND AS 115 Revenue from Contracts with Customers”
retrospectively
# No need to restate the completed contracts which are begin & end
within the same annual reporting period.
# Any variable consideration in contract, then transaction price on the date
of completion of contract may be considered instead of
estimating in the comparative periods.
# No need of disclosure of transaction price allocated to performance
obligation and an explanation when to expect to recognize as revenue
for the reporting periods before the 1st IND AS reporting period.
AKGVG & Associates

22. * Any expedient uses by entity need to apply consistently to all the contracts for all
the reporting period presented.
* In Addition disclosure require
# Expedients that have been used
# Qualitative assessment of the estimated effect of applying each those
expedients.
* First time adopter can measure non currents assets held for sell and discontinue
operations as per IND AS 105.
i.e. Lower of Carrying amount
or Fair value – cost to sell
* Recognize any difference between carrying amount as per previous GAAP &
measured amount under IND AS directly to the retained earnings.
AKGVG & Associates

23. Thankyou
In case of any query or suggestions please contact
Chitranshu Rahul Srivastava
CA, IFRS
Email IDs
chitranshu.srivastava@akgvg.com
crsri90@gmail.com
AKGVG & Associates