Ind AS 101: Other Optional Exemptions in Appendix D

Understand Other Optional Exemptions in Appendix D

Key rules to remember

Share-based payment (D2) relief

Vested before date of transition → no Ind AS 102 application; unvested at transition → full Ind AS 102

Also covers cash-settled liabilities settled before the date of transition. Unvested awards need expense recognised from grant date for the period elapsed.

Unvested equity award cost to transition date

Options expected to vest × fair value at grant date × (period elapsed ÷ total vesting period)

Debit opening retained earnings, credit share-based payment reserve. Fair value is fixed at grant date and is not re-measured for equity-settled awards.

Revenue (D34)

Date of initial application (Ind AS 115, C5) = beginning of first Ind AS reporting period

Completed contracts need not be restated. If the transition relief is used, para C6 of Ind AS 115 must also be applied.

Lessee liability at transition

Lease liability = Σ [Remaining lease payment ÷ (1 + r)^t], r = incremental borrowing rate at date of transition

The right-of-use asset is either equal to the liability, adjusted for prepaid or accrued lease payments, or its carrying amount as if Ind AS 116 had always applied, discounted at the transition-date rate.

Cumulative translation differences

CTD at date of transition deemed = ₹0 (all foreign operations)

Transfer the old balance to retained earnings. On later disposal, only translation differences arising after transition are reclassified to profit or loss.

Borrowing costs

Apply Ind AS 23 from date of transition (or an earlier chosen date)

Borrowing costs capitalised under previous GAAP before that date are carried forward unchanged.

Decommissioning liability in PPE

Liability under Ind AS 37 at transition; asset cost = liability discounted back to when it first arose at historical risk-adjusted rate; less accumulated depreciation

Avoids reconstructing every change in the liability since acquisition.

Compound financial instruments

Liability component not outstanding at transition → no need to separate the cumulative interest accreted on the liability (retained earnings portion) from the original equity component

The equity component is still classified separately from the liability. If the liability component is still outstanding, split accounting is required.

How to solve Other Optional Exemptions in Appendix D questions

1. 1Read the case and list each item: share options, contracts with customers, leases, foreign operations, borrowings, asset retirement obligations, convertible instruments.
2. 2Fix the date of transition and the first Ind AS reporting period. Most conclusions depend on whether an event is before or after these dates.
3. 3Match each item to its exemption and check its exact condition, such as vested before transition, completed contract, or liability component not outstanding.
4. 4Check whether the entity has elected the exemption. If the question is silent, state both outcomes briefly or state your assumption.
5. 5Compute the opening Ind AS carrying amount using the exemption, and the previous GAAP amount being replaced.
6. 6Pass the transition entry. Take the difference to retained earnings or the relevant reserve. Say that it goes there under Ind AS 101 and not through profit or loss.
7. 7State the effect on later periods, such as depreciation, expense for unvested awards, or the disposal of a foreign operation.
8. 8Conclude in one line naming the exemption, the relief taken and the equity impact.

Quickest way: Item, condition, relief, reserve

Common mistakes in Other Optional Exemptions in Appendix D

• Applying Ind AS 102 to awards that vested before the date of transition.

  Students remember that Ind AS 102 is retrospective and forget the D2 relief.

  Fix: Split awards into vested and unvested at the date of transition. Apply Ind AS 102 only to the unvested ones.

• Treating the revenue exemption (D34) as permission to ignore Ind AS 115 altogether.

  The word 'exemption' is read as complete relief.

  Fix: D34 only lets you use the Ind AS 115 transition relief in C5. New and uncompleted contracts still follow Ind AS 115.

• Zeroing translation differences for only some foreign operations.

  Students pick the favourable operations.

  Fix: The CTD exemption applies to all foreign operations. Zeroing moves the balance to retained earnings and is not a profit or loss item.

• Recognising the transition adjustment in profit or loss.

  Students treat the adjustment like a normal current-period entry.

  Fix: Adjustments from changing to Ind AS at the date of transition go to opening retained earnings or another equity reserve, not profit or loss of the comparative year.

• Using the lease inception rate or a wrong rate for the liability.

  Students copy the usual lessee method without noting the transition relief.

  Fix: Under the relief, discount remaining payments at the incremental borrowing rate at the date of transition.

• Forgetting the lease prepayment adjustment, or separating the retained earnings portion of a compound instrument when the liability is already settled.

  Students rush to the final number and skip the condition.

  Fix: For leases, adjust the right-of-use asset for prepaid or accrued lease payments. For compound instruments, check whether the liability component is still outstanding. If it is not, the separation of the cumulative interest from the original equity component is not needed.

Worked examples