CA Final · Financial Reporting · Ind AS 101 First-time Adoption of Ind AS
Kaveri Infra Ltd is preparing its opening Ind AS balance sheet. Under previous GAAP it carried a deferred expenditure asset of Rs 40 lakh that does not qualify for recognition as an asset under Ind AS. No goodwill adjustment is permitted for this item under the transition rules. How should Kaveri Infra treat this item in the opening Ind AS balance sheet?
Kaveri should exclude the Rs 40 lakh item from its opening Ind AS balance sheet and account for the resulting change in retained earnings at the transition date. It does not qualify as an asset under Ind AS, and the adjustment is not routed through first-year profit or loss.
- AExclude it from the opening balance sheet and adjust the resulting change in retained earnings at the transition dateCorrect
- BRetain it as an asset and amortise it over five years
- CExclude it and charge Rs 40 lakh to the profit or loss of the first Ind AS reporting year
- DAdjust it against the securities premium account only
Explanation
An item recognised under previous GAAP that does not qualify as an asset or liability under Ind AS is excluded from the opening Ind AS balance sheet. The resulting change is accounted for in retained earnings as at the transition date, except in specific instances requiring goodwill adjustment. Charging to the first-year profit or loss is wrong because the adjustment is made at the transition date.
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