Skip to content

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

Ind AS 101 differs from IFRS 1 where a specific instance requires an adjustment to goodwill. Mehta Industries Ltd has such an instance and a balance of Rs 12 lakh in Capital reserve. The required adjustment is Rs 20 lakh. How much can be adjusted against Capital reserve under Ind AS 101?

Rs 12 lakh. Ind AS 101 allows the adjustment against Capital reserve only up to the balance available in that reserve. Since the required Rs 20 lakh exceeds the Rs 12 lakh balance, the permitted amount is capped at Rs 12 lakh.

  1. ARs 20 lakh, creating a negative Capital reserve
  2. BRs 12 lakh, being limited to the balance available in Capital reserveCorrect
  3. CNil, because Capital reserve cannot be used
  4. DRs 8 lakh, being the excess of the adjustment over the reserve

Explanation

Where IFRS 1 allows adjustment in goodwill, Ind AS 101 permits adjustment against Capital reserve only to the extent the amount does not exceed the Capital reserve balance available. Here the adjustment of Rs 20 lakh exceeds the balance of Rs 12 lakh, so the limit is Rs 12 lakh. Rs 8 lakh is the unabsorbed portion, not the amount adjusted.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 101 First-time Adoption of Ind AS shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 101 First-time Adoption of Ind ASFree diagnostic mock

More Ind AS 101 First-time Adoption of Ind AS questions