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CA Final · Financial Reporting · Ind AS 101 First-time Adoption of Ind AS

Banyan Foods Ltd adopts Ind AS for the first time. Its previous-GAAP balance sheet carries a deferred expenditure item that does not qualify for recognition as an asset under Ind AS. How must it be treated in the opening Ind AS balance sheet?

The item is excluded from the opening Ind AS balance sheet because it does not qualify as an asset under Ind AS. The resulting change is generally accounted for in retained earnings at the transition date, with goodwill adjustment only in specific instances.

  1. AExcluded from the opening balance sheet, with the resulting change generally accounted for in retained earnings at the transition dateCorrect
  2. BRetained as an asset and amortised over five years through profit or loss
  3. CExcluded, with the entire amount always adjusted against goodwill
  4. DRetained in the opening balance sheet and shown under other comprehensive income

Explanation

Items recognised under previous GAAP that do not qualify as assets or liabilities under Ind AS are excluded from the opening Ind AS balance sheet. The resulting change goes to retained earnings at the transition date, except in specific instances requiring goodwill adjustment. Always adjusting goodwill is wrong because that applies only in those instances.

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